Question

What is the Macaulay duration of a bond with a coupon of 5.4 percent, nine years to maturity, and a current price of $1,055.40? (Do not round intermediate calculations. Round your answers to 3 decimal places.) (7.410 is not correct of Macaulay )

Answer 1

Computation of Yield Rate:

RATE(nper, pmt, pv, [fv]) = '=RATE(9,1000*5.4%,-1055.4,1000)' = 4.63%

The RATE function syntax has the following arguments:

• Nper    Required. The total number of payment periods in an annuity. = 9 Yeras

• Pmt    Required. The payment made each period and cannot change over the life of the annuity. $1000 * 5.40% = $54

• Pv    Required. Current Price = $1055.40

• Fv    Optional.Maturity Value = $1000

Yield = 4.63%

DURATION(settlement, maturity, coupon, yld, frequency, [basis])

The DURATION function syntax has the following arguments:

• Settlement    Required. The security settlement date is the date after the issue date when the security is traded to the buyer. it is notional = 1/1/2020

• Maturity    Required. The security's maturity date. The maturity date is the date when the security expires. it is notional = 12/31/2020

• Coupon    Required. The security's annual coupon rate. = 5.40%

• Yld    Required. The security's annual yield. = 4.63%

• Frequency    Required. The number of coupon payments per year. For annual payments, frequency = 1;

Macaulay Duration = 8.046 Years

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