1 answer

A bond currently sells for $1,050, which gives it a yield to maturity of 6%. Suppose...

Question:

A bond currently sells for $1,050, which gives it a yield to maturity of 6%. Suppose that if the yield increase by 25 basis points, the price of the bond falls to $1,025. What is the duration of this bond?


Answers

Change in Bond Price = -(25)/1,050 = -2.38%

Effective Duration = -0.0238/0.0025

Effective Duration = 9.52 years

.

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