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What is the duration of a three-year bond with a 3% coupon rate and a 3%...

What is the duration of a three-year bond with a 3% coupon rate and a 3% yield to maturity? (If necessary, you can assume the face value of the bond is $1,000.)

A.

2.8334
B.

2.8861
C.

2.8594
D.

2.9416
E.

2.9135

Solutions

Expert Solution

Calculation of Duration
1st bond
3.00%
Year Cash Flow PV fatctor = 1/ (1+r)^t PV Time * PV
0 $           -   1.000              -                 -   
1 $     30.00 0.971       29.126       29.126
2 $     30.00 0.943       28.278       56.556
3 $     30.00 0.915       27.454       82.363
3 $1,000.00 0.915     915.142 2,745.425
Total 1,000.000 2,913.470
Duration= 2913.4/1000
Duration 2.9135
So option E is the right answer.

jeff jeffy answered 2 years ago
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