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In: Finance

I need to calculat The duration of bond I just need anything under this topic because...

I need to calculat The duration of bond

I just need anything under this topic because the question will be like this so I need any question so I can study it

Solutions

Expert Solution

Okay! Let me help you by first explaining what is a duration of a bond and then solving a question based on it.

The concept of duration was given by Frederick MACAULAY.

It refers to the weighted average maturity of its cash flow stream where weights are proportional to the present value of cash flows. An dto calculate Present values, we use Yield to Maturity (YTM) as teh discount rate.

In simple words, duration reoresents the length of time that passes before the average amount of Present Value from the bond is received.

And also note that duration is always less than maturity.

I am attaching a question which I have solved based on duration. Hope that helps you understand the concept.

If you like my answer, please help me with an upvote. Means a lot :)


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