You own a bond that mature in three years. It has a 6% coupon, with a...

You own a bond that mature in three years. It has a 6% coupon, with a current price of %948.46. Current market rates for three-year securities are 8%. The PV factors at 8% are .926, .857, .794, .735, and .681 for 1 through 5 years. What is the duration of your bond?

Expert Solution

Calculation of Duration


		8.00%
Year	Cash Flow	PV fatctor = 1/ (1+r)^t	PV	Time * PV
0	$ -	1.000	-	-
1	$ 60.00	0.926	$ 55.56	55.556
2	$ 60.00	0.857	$ 51.44	102.881
3	$ 60.00	0.794	$ 47.63	142.890
3	$ 1,000.00	0.794	$ 793.83	2,381.497
		Total	$ 948.46	2,682.823

	Duration= 2682.8/948.45

	Duration=	2.83

jeff jeffy answered 3 years ago

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