Calculate the duration, in years, of a bond that matures in 5 years

01 / 10 / 2021 Projects

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Calculate the duration, in years, of a bond that matures in 5 years

Calculate the duration, in years, of a bond that matures in 5 years, pays \$60 in interest twice a year, and sells for \$997.55. Explain how you can use duration (or modified duration) to estimate the change in the price of a bond when the yield to maturity changes. Estimate how much the price of this bond will change if rates go up one percentage point, and then calculate an exact price assuming a one percentage point jump in the YTM. Why doesnât the duration approach give you an exact answer.

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