Question

Find the duration of a 6.8% coupon bond making semiannually coupon payments if it has three years until maturity and has a yield to maturity of 6.0%. What is the duration if the yield to maturity is 9.4%? Note: The face value of the bond is $100.

Answer 1

Duration = SUm [ Wt * Year ]

Period	CF	PVF @3%	Disc CF	Wt	Wt * period
1	$      3.40	0.9709	$      3.30	0.0323	0.0323
2	$      3.40	0.9426	$      3.20	0.0314	0.0627
3	$      3.40	0.9151	$      3.11	0.0305	0.0914
4	$      3.40	0.8885	$      3.02	0.0296	0.1183
5	$      3.40	0.8626	$      2.93	0.0287	0.1435
6	$      3.40	0.8375	$      2.85	0.0279	0.1672
6	$ 100.00	0.8375	$   83.75	0.8197	4.9183
Duration in Periods					5.5338
No.of periods per anum					2.0000
Duration in Years					2.7669

Part B:

Period	CF	PVF @4.7%	Disc CF	Wt	Wt * period
1	$      3.40	0.9551	$      3.25	0.0348	0.0348
2	$      3.40	0.9122	$      3.10	0.0332	0.0665
3	$      3.40	0.8713	$      2.96	0.0317	0.0952
4	$      3.40	0.8322	$      2.83	0.0303	0.1213
5	$      3.40	0.7948	$      2.70	0.0290	0.1448
6	$      3.40	0.7591	$      2.58	0.0277	0.1659
6	$ 100.00	0.7591	$   75.91	0.8133	4.8799
Duration in Periods					5.5083
No.of periods per anum					2.0000
Duration in Years					2.7542