Asked by
Maanit Rohira
on Nov 04, 2024
Verified
Consider a six yearannual bond paying a 5% coupon, with a yield to maturity of 4.5%. What is the duration of the bond?
A) 4.925
B) 5.152
C) 5.339
D) 5.787
Yield To Maturity
The total return anticipated on a bond if the bond is held until its maturity date, including all interest payments and the repayment of principal.
Coupon Rate
The interest rate that a bond issuer will pay to a bondholder, typically expressed as an annual percentage of the bond's face value.
Duration
A measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates, usually expressed in years.
- Comprehend the principle of bond duration and the methodology for its calculation.
- Comprehend how coupon rates and maturity periods influence the duration of bonds.
- Analyze the impact of yield to maturity on the duration and price levels of bonds.
Verified Answer
AB
Learning Objectives
- Comprehend the principle of bond duration and the methodology for its calculation.
- Comprehend how coupon rates and maturity periods influence the duration of bonds.
- Analyze the impact of yield to maturity on the duration and price levels of bonds.