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**CFA Practice Question**

The following table gives the price of a bond with face value $1000 for different interest rates:

5.15% | 101.0898

5.20% | 100.8707

5.10% | 101.3094

Interest Rate | Price

5.15% | 101.0898

5.20% | 100.8707

5.10% | 101.3094

The duration of the bond is:

A. 2.17

B. 4.78

C. 4.35

**Explanation:**Duration = (V- - V+)/(V0 * 2 * dV). Change the price of the bond by changing yield by a small amount (here 1/20 of 1%) in both directions to get V- and V+.

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**User Contributed Comments**
4

User |
Comment |
---|---|

bsm9 |
I disagree... I get 2.19 when using the formula. 101.3094-100.8707 / 2*100*.001 |

nathandrake |
The answer is correct. @bsm9: ur denominator should be 2*base price(V0)*change in yield = (2*101.0898*0.0005) |

zzhumanov |
still cannot understand: (101.3094-101.0898)/2*100.8708*0.0005 = 2.17 why 4.35? |

HolzGe1 |
zzhumanov: try switching around the values for V0 and V+, and you'll get 4.35 :) |