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Duration of Coupon Paying Bond

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What is the Duration of a 10% annual coupon paying bond, with a face value of $1,000, and 5 years to maturity? The yield to maturity on the bond is 11%. Assuming that immediately after the purchase of the bond the YTM changed to 9%; show that an investor whose holding horizon is equal to the duration of the above bond is immunized.

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Solution Summary

This solution calculates the duration of the bond and an investor's rate of return with a bond at YTM of 11% and 9%.

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Duration of Bond = summation [t*CFt/(1+y)^t] ...

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