An insurance company is analyzing two bonds and is using duration as the measure of interest rate risk. Both the bonds trade at a yield to maturity of 8 percent, have $10,000 par values, and have five years to maturity. The bonds differ only in the amount of annual coupon interest that they pay: 5 and 7 percent. What is the duration for each five-year bond?
An insurance company is analyzing two bonds and is using duration as the measure of interest rate risk. Both the bonds trade at a yield to maturity of 8 percent, have $10,000 par values, and have five years to maturity. The bonds differ only in the amount of annual coupon interest that they pay: 5 and 7 percent. What is the duration for each five-year bond?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 7P: Bond Valuation with Semiannual Payments
Renfro Rentals has issued bonds that have a 10% coupon rate,...
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