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A Treasury bond that settles on October 18, 2016, matures on March 30, 2035. The coupon...

A Treasury bond that settles on October 18, 2016, matures on March 30, 2035. The coupon rate is 6.05 percent and the bond has a yield to maturity of 5.50 percent. What are the Macaulay duration and modified duration?

Macaulay duration
Modified duration

Solutions

Expert Solution

Basic Information Anually Semi anually
Settlement 10/18/2016 10/18/2016
Maturity 3/30/2035 3/30/2035
Coupon 6.05% 6.05%
YTM 5.50% 5.50%
Frequency 1 2
Macaulay duration 11.46309713 11.555515
Modified duration 10.86549491 11.24624331
Excel DURATION(H8,H9,H10,H11,1,1)
Formula MDURATION(H8,H9,H10,H11,2,1)

The Macaulay duration is the weighted average term to maturity of the cash flows from a bond. The weight of each cash flow is obtained by dividing the PV of the cash flow by the price. Macaulay duration is used by portfolio managers.

The Modified Macaulay duration which accounts for changing yield to maturities

jeff jeffy answered 1 year ago
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