A 10-year bond costs $1,000 today, paying $100 semiannual coupons, and returning $1,000 in addition to...

A 10-year bond costs $1,000 today, paying $100 semiannual coupons, and returning $1,000 in addition to the final coupon at the end of year 10. If the yield curve is a flat 0%, what is the plain duration of this bond, and how does this differ from the Macaulay duration? Report as your answer the average of the two durations.

Expert Solution

Plain duration is nothing but modified duration of bond

Modified duration=maculayduration/(1+ytm)

Here YTM=0% so plain duration and maculay duration both will be same

it is 7.75%

jeff jeffy answered 1 year ago

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