### CFA Practice Question

There are 266 practice questions for this study session.

### CFA Practice Question

What is the duration of a 10%, 12-year, option-free bond selling at 124.09? Use 50 bp.

A. 7.63
B. -7.49
C. 7.49

Current yield 7%, N=24, PV=-124.09, PMT = 5, FV = 100, I/YR =?= 3.499 (2) = 7%
New yields at 6.5 and 7.5%. V- = 128.85 and V+ = 119.56
Duration = (128.85 - 119.56)/[2 x 124.09 x 0.005] = 7.49

User Comment
kalps 1) Need to find current yield 2) Need to estimate prices using a 0.5% change in yield 3) Then apply duration formula This is another example of an incomplete question how are you meant to know what the change in yield is ?????????? Until you see the answer you cannot tell it is 1/2%
Aimy you should calculate current yield at first. This is not an incomplete question.
gruszewski You should assume a small yield change (not larger than 50 bp). Actually for 1% yield change answet is quite similar.
quincy mark this one
wldu yes, how can I assume 0.5%? By common sense?
tomchen I used 25bp, v_=126.44, v+=121.7931, Duration=
(126.44-121.7931)/2*124.09*.0025=7.49, same thing