Perpetual Bond and Zero Coupon Bond
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The formula for the duration of a perpetual bond that makes an equal payment each year in perpetuity is (1+yield)/yield. If bonds yield 5%, which has the longer duration--a perpetual bond or a 15 year zero coupon bond? What if the yield is 10%.
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Solution Summary
This solution provides calculations for durations of perpetual bonds and zero coupon bonds.
Education
- MBA, Indian Institute of Finance
- Bsc, Madras University
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