a. What is the duration of a two-year bond that pays an annual coupon of 10.5 pe

Question

a. What is the duration of a two-year bond that pays an annual coupon of 10.5 percent and has a current yield to maturity of 12.7 percent? Use $1,000 as the face value. (Do not round intermediate calculations. Round your answer to 4 decimal places. (e.g., 32.1616))

b. What is the duration of a two-year zero-coupon bond that is yielding 11.5 percent? Use $1,000 as the face value.

____

a. What is the duration of a four-year Treasury bond with a 10.5 percent semiannual coupon selling at par?

b. What is the duration of a three-year Treasury bond with a 10.5 percent semiannual coupon selling at par?

c. What is the duration of a two-year Treasury bond with a 10.5 percent semiannual coupon selling at par? (For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))

Explanation / Answer

a) FV                1,000.00 Time Cash Flow T*CF PV(T*CF) YIELD 12.70% 1           105.00       105.00 93.1677 COUPON                    105.00 2        1,105.00    2,210.00 1739.981 TERM 2 1833.148 PRICE $963.16 DURATION                        1.90 b) FV                1,000.00 Time Cash Flow T*CF PV(T*CF) YIELD 11.50% 1                     -                   -   0 COUPON                             -   2        1,000.00    2,000.00 1995.408 TERM 2 1995.408 PRICE $804.36 DURATION                        2.48 c) PRICE 1000 TIME CASH FLOW T*CF PV(T*CF) 0.50 52.5 26.25 25.58693 DURATION 8.020 1.00 52.5 52.5 49.88124 1.50 52.5 78.75 72.93188 2.00 52.5 105 94.7862 2.50 52.5 131.25 115.4899 3.00 52.5 157.5 135.0872 3.50 52.5 183.75 153.6208 4.00 52.5 210 171.1319 4.50 52.5 236.25 187.6603 5.00 52.5 262.5 203.2445 5.50 52.5 288.75 217.9217 6.00 52.5 315 231.7277 6.50 52.5 341.25 244.6972 7.00 52.5 367.5 256.8636 7.50 52.5 393.75 268.2593 8.00 1052.5 8420 5591.589 8020.479 d) PRICE 1000 TIME CASH FLOW T*CF PV(T*CF) 0.50 52.5 26.25 25.58693 DURATION 6.073 1.00 52.5 52.5 49.88124 1.50 52.5 78.75 72.93188 2.00 52.5 105 94.7862 2.50 52.5 131.25 115.4899 3.00 52.5 157.5 135.0872 3.50 52.5 183.75 153.6208 4.00 52.5 210 171.1319 4.50 52.5 236.25 187.6603 5.00 52.5 262.5 203.2445 5.50 52.5 288.75 217.9217 6.00 1052.5 6315 4645.588 6072.931 e) PRICE 1000 TIME CASH FLOW T*CF PV(T*CF) 0.50 52.5 26.25 25.58693 DURATION 4.078 1.00 52.5 52.5 49.88124 1.50 52.5 78.75 72.93188 2.00 52.5 105 94.7862 2.50 52.5 131.25 115.4899 3.00 52.5 157.5 135.0872 3.50 52.5 183.75 153.6208 4.00 1052.5 4210 3430.786 4078.171

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