1. (1 point) What is the effect on a bond's duration of increasing the bond's maturity? Use the basic numerical example in problem 1 above to create a Data Table and plot the answer. Note that as maturity 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. Please compute the duration of the consol in your example using this formula.

Please explain how to do this?

Here is the graph above

A B C D E F G H I J K EFFECT OF MATURITY ON DURATION 2 Current date 5/21/2007 #NAME? 3 Maturity, in years 20 4 Maturity date 5/21/2027 #NAME? 5 YTM 15% Yield to maturity (i.e., discount rate) 6 Coupon 4% 7 Face value 1,000 8 9 Duration 9.0398 #NAME? 10 10 11 Data table: Effect of maturity on duration Effect of Maturity on Duration Coupon rate = 4.0%, YTM = 15.00% 12 9.0398 #NAME 13 1 1.0000 14 5 4.5163 15 Bond maturity --> 10 7.4827 16 15 8.8148 17 20 9.0398 Duration 18 25 8.7881 19 30 8.4461 20 40 7.9669 21 50 7.7668 22 60 7.6977 23 70 7.6759 O 24 80 7.6693 0 10 20 30 40 50 60 70 80 25 26 Maturity