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rjkz [21]
3 years ago
15

A bond has annual coupons, $1000 par value, 2 years to maturity, 8% coupons and a 6% yield. Calculate the Macaulay Duration. The

settlement date (purchase date) is 1/1/2030 and maturity date is 1/1/2032.
Give your answer to two decimal place.
Business
1 answer:
Softa [21]3 years ago
7 0

Answer:

The answer is "1.93 years".

Explanation:

Macaula \ \ duration \ \ \ \ \ \ \ \ \ \ 1000 \times 8\%\\\\

years \ \ \ \   cash \ flows \ \ \ \  pv\ of \ 6\%\ \ \ \ present \ value \ \ \ \ current \ value \ \ \ \  pv/current \ value \ \ \ \frac{pv}{cp}\times t\$80.00\ \ \ \ \ \ \ 0.9434 \ \ \ \ \ \ \ \$75.472 \ \ \ \ \ \ \ \$1,036.67 \ \ \ \ \ \ \ 0.0728 \ \ \ \ \ \ \ 0.0728\\\\\$ 1,080.00 \ \ \ \ \ \ \ 0.8900 \ \ \ \ \ \ \ \$961.196 \ \ \ \ \ \ \ \$1,036.67 \ \ \ \ \ \ \ 0.9272 \ \ \ \ \ \ \ 1.8544\\\\

                                             \$ 1,036.668 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \  \ \ \ \ \ \ \ \   1.92772\\\\

that's why the Macaula duration is 1.93 years.

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