Question

what is the duration of a four year bond with a 10 percent coupon paid semi annually and giving a 8 percent rate of return ?

Answer 1

Years	Cashflow	Present value calculation	Present value	Duration D = (PV*T)
0.5	50	50/(1+4%)^1	48.07692308	24.04
1	50	50/(1+4%)^2	46.22781065	46.23
1.5	50	50/(1+4%)^3	44.44981793	66.67
2	50	50/(1+4%)^4	42.74020955	85.48
2.5	50	50/(1+4%)^5	41.09635534	102.74
3	50	50/(1+4%)^6	39.51572629	118.55
3.5	50	50/(1+4%)^7	37.99589066	132.99
4	1050	1050/(1+4%)^8	767.2247153	3068.90
Total	1067.33	3645.59
Macaulay Duration = Duration D / Present value of cashflows	Macaulay Duration =3645.59 / 1067.33 = 3.42