Question: Which answer is correct? A 4 per cent bond pays 40 per year for the next three years and 1040 in year 4. if its

Which answer is correct?

A 4 per cent bond pays 40 per year for the next three years and 1040 in year 4. if its yield is now

2 per cent, its duration in years is:

a) 2.86

b) 3.42

c) 3.78

d) 4.00

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