Asked by Maria Rodarte on Jul 04, 2024
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A bond pays annual interest. Its coupon rate is 9%. Its value at maturity is $1,000. It matures in 4 years. Its yield to maturity is currently 6%.
The modified duration of this bond is ________ years.
A) 4
B) 3.56
C) 3.36
D) 3.05
Coupon Rate
The annual interest rate paid by a bond's issuer to its bondholders, usually expressed as a percentage of the bond's face value.
Yield To Maturity
The total return anticipated on a bond if the bond is held until its maturity date, considering all interest payments and the principal repayment.
Modified Duration
A measure of the sensitivity of a bond's price to changes in interest rates, reflecting the change in the bond’s price for a 1% change in yield.
- Master the techniques and outcomes associated with bond duration and modified duration analysis.
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PM
Learning Objectives
- Master the techniques and outcomes associated with bond duration and modified duration analysis.