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%?© BrainMass Inc. brainmass.com June 3, 2020, 7:07 pm ad1c9bdddf
Thanks for using BrainMass.com. Have a great day.
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)
This solution is comprised of a detailed explanation to answer the request of the assignment of more than 300 words of text.