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Marianna [84]
4 years ago
11

What is the duration of a two-year bond that pays an annual coupon of 10.8 percent and has a current yield to maturity of 13.3 p

ercent? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 4 decimal places. (e.g., 32.1616))
Business
1 answer:
Kitty [74]4 years ago
5 0

Answer:

Explanation:

Year     cash flow at  10.8%     PV of cash flow at 13.3% discount   PV X time

1                  108                                 95.3222                                      95.3222 x 1                      

2                 1108                                863.1374                                    863.1374 x2

Total                                                  958.4596                                    1821.597

Duration of bond   = 1821.597 / 958.4596

= 1.9 year

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