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    Duration of a 6% coupon bond

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    Find the duration of a 6% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 6%. What is the duration if the yield to maturity is 10%?

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    Yield to maturity is the rate that the investor earned if they purchase bond and hold them until maturity. Therefore, we also assume that the second bond, which has the yield to maturity of 10%, has the coupon rate of 10% with annual coupon payment and three years until maturity.

    Duration is calculated using this formula:

    n t(PVCFt) n
    Duration = Σ Σ PVCFt = Σ t(PVCFt)

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