1. Consider a bond with semiannual coupon payments of $50, a principal payment of $1,000 in 5 years, and a price of $1,000. Assume that the yield curve is a flat 10%. What is the duration of the bond?

2. Consider a bond with annual coupon payments of $100, a principal payment of $1,000 in 10 years, and a cost of $1,000. Assume a flat yield curve with a 10% yield to matu-rity. What is the duration of the bond? If the yield curve remains unchanged, what is the bond's duration in three years? In five years? In eight years?

Answer rating: 100% (QA)

1 To calculate the duration of a bond we can use the formula for Macaulay d... View the full answer