CFA Practice Question

CFA Practice Question

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

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+.

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 :)
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