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Macaulay Duration bond

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Compute based on the following, consider the following:

1. Bond w/5 yr term to mature, 12% coupon (annual), market yield 10%.
2. Bond w/4 yr term to mature, 12% coupon (annual), market yield 10%.
3. Compare answers for 1 & 2, discuss implications of this for classical immunization.

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Solution Summary

This solution discusses a Macaulay duration bond.

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Assuming the Par Value of the bond is 1000
1. 12/(1.1) + 12/(1.1^2) + 12/(1.1^3) + 12(1.1^4) + 1000/(1.1^5) ...

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