What is the effect on a bonds duration of increasing the bonds maturity? As in the previous
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What is the effect on a bond’s duration of increasing the bond’s maturity? As in the previous example, use a numerical example and plot the answer. Note that as N → ∞, the bond becomes a consol (a bond that has no repayment of principal but an infinite stream of coupon payments). The duration of a consol is given by (1 + YTM ) / YTM . Show that your numerical answers converge to this formula.
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The duration of a bond is a measure of its price sensitivity to changes in interest rates It is calc...View the full answer
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