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Basic Question 1 of 18
A bond with annual coupon payments has the following characteristics:
Yield to maturity: 10%
Macaulay duration: 9
B. 8.33
C. 9.78
Coupon rate: 8%
Yield to maturity: 10%
Macaulay duration: 9
The bond's modified duration is ______.
A. 8.18
B. 8.33
C. 9.78
User Contributed Comments 7
| User | Comment |
|---|---|
| haarlemmer | annual coupon! |
| tanyak | ANNUAL STUPID COUPON! |
| wink44 | Thought we didn't need to memorize that equation for the test? |
| anneki | We can memorize one more equation. |
| DonAnd | my sentiments exactly wink44 but it is actually an easy formula. |
| rvera | I always think that we should assume a semi-annual coupon...but perhaps that is just me. |
| johntan1979 | Question stated "annual". It's a very easy formula, guys! I'm sure there's some space left in our coconuts after all those CFA curriculum and formulas :) |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
define, calculate, and interpret Macaulay, modified, and effective durations;
explain why effective duration is the most appropriate measure of interest rate risk for bonds with embedded options;
define key rate duration and describe the use of key rate durations in measuring the sensitivity of bonds to changes in the shape of the benchmark yield curve;
CFA® 2024 Level I Curriculum, Volume 5, Module 46.