Asked by
Amber Mowrey
on Dec 08, 2024
Verified
A seven-year par value bond has a coupon rate of 9% (paid annually) and a modified duration of
A) 7 years.
B) 5.49 years.
C) 5.03 years.
D) 4.87 years.
Par Value Bond
A par value bond is a bond that is issued at its face value, and the amount that is paid back to the bondholder at maturity.
Coupon Rate
The interest rate stated on a bond when it's issued, which represents the annual interest payment made to bondholders.
Modified Duration
A measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates, adjusted for the bond's yield.
- Determine and explain the Macaulay and modified durations for a range of bonds.
- Examine how yield to maturity, coupon rate, and maturity period influence bond duration.
Verified Answer
AF
Learning Objectives
- Determine and explain the Macaulay and modified durations for a range of bonds.
- Examine how yield to maturity, coupon rate, and maturity period influence bond duration.