  You are creating a portfolio that consists of the following two bonds. Bond A pays an annual 7 percent coupon, matures in two years, has a yield to maturity of 8 percent, and a face value of \$1,000. Bond B pays an annual 8 percent coupon, matures in three years, has a yield to maturity of 9 percent, and a face value of \$1,000.Calculate the Modified Duration for Bond A.

Question

You are creating a portfolio that consists of the following two bonds. Bond A pays an annual 7 percent coupon, matures in two years, has a yield to maturity of 8 percent, and a face value of \$1,000. Bond B pays an annual 8 percent coupon, matures in three years, has a yield to maturity of 9 percent, and a face value of \$1,000.

Calculate the Modified Duration for Bond A.

Step 1

We will use the MDURATION function of the excel to calculate the modified duration of bond A.

Let's assume settlement date of the bond is 1/1/2019 ( you can assume any date, it's immaterial), Hence maturity date will be 2 years away from this date. Hence, Mat...

Want to see the full answer?

See Solution

Want to see this answer and more?

Our solutions are written by experts, many with advanced degrees, and available 24/7

See Solution
Tagged in 