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Basic Question 1 of 18

A bond with annual coupon payments has the following characteristics:

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!
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 :)
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Your review questions and global ranking system were so helpful.


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.