### CFA Practice Question

There are 764 practice questions for this topic.

### CFA Practice Question

An 8% annual coupon rate, semi-annual pay, 20-year corporate bond is priced to yield 9%. The Macaulay duration for this bond is 8.85 years. Given this information, the bond's modified duration is ______.
A. 8.12
B. 8.47
C. 8.51
Explanation: 8.85/(1+9%/2)=8.47

User Comment
mbuechs Only with semi-annual coupon!
Iyal I got it. Because semi-annual i/2
modified D = Maculay D / (1+i/2)
ninaz I am using the same formula Iyal uses, but result I am getting is 8.51. ???
option You have to use current yield (9%) to calculate, not the coupon rate.
mbuechs2 This assumes the US convention of semiannual coupon payments.
chenchow Modified Duration = Macaulay Duration / (1+ (yield/# of periods per year))
danlan yield=YTM and not coupon rate
shiva5555 I can't believe I got this question right. I am so passing this test.
azramirza Why semiannual??
Jurrens azramirza: assume semiannual if not specified
shiva5555: pride comes before the fall
hoyleng 8.85/(1+0.09/2)
= 8.85/1.045
= 8.4689
bidisha Hey nothing wrong with a little optimism. I sure need more of it
alles so you divide an annual measure (duration in years) for a measure that is semi-annual? doesn't make sense to me.
warnggg I hate bonds