What is the duration of a two-year bond that pays an annual coupon of 10.8 percent and has a current yield to maturity of 13.3 percent? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 4 decimal places. (e. g., 32.1616))

Question

Talon Hicks

Business

31 January, 11:26

What is the duration of a two-year bond that pays an annual coupon of 10.8 percent and has a current yield to maturity of 13.3 percent? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 4 decimal places. (e. g., 32.1616))

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Bully · Answer 1

Year cash flow at 10.8% PV of cash flow at 13.3% discount PV X time

1 108 95.3222 95.3222 x 1

2 1108 863.1374 863.1374 x2

Total 958.4596 1821.597

Duration of bond = 1821.597 / 958.4596

= 1.9 year