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Two bonds are available for purchase in the financial markets. The first bond is a 5...

Two bonds are available for purchase in the financial markets. The first bond is a 5 year, $1000 bond that pays an annual coupon of 10%. The second bond is a 5 year, $1000 zero coupon bond.

What is the duration of these bonds two years in the future, if the YTM remains at 8%?

Solutions

Expert Solution

A Zero Coupon bond duration is alway its maturity period irrespective of YTM

At present Duration of a zero Coupon bond is 5 years and after 2 years the duration of a zero coupon bond is 3 years

jeff jeffy answered 2 years ago
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