CFA Practice Question

CFA Practice Question

A Zero-Coupon bond issue with 10 years to maturity has a face value of $1 million. The YTM is 5%. The dollar duration of the bonds is:
A. $61,391.33
B. $100,000
C. $613,913.25
Explanation: The dollar duration is the approximate change in price for a 1% change in YTM. Dollar Duration = Duration * Price / 100

User Contributed Comments 3

User Comment
Sandar need more explanation pls
Jlinne Duration for Zeroes = Maturity. So for this problem duration = 10

AN calculated bond price using annual interest rates instead of semi-annual for some reason even though semi-annual compounding is usually used for zeroes.

n10 i/y5 pmt0 fv 10m cpt pv

pv = 613,913.25

10* (613,913.25/100) = 61,391.33
HolzGe1 Funny, I thought a zero-bonds MacDur = Time-to-maturity. So ModDur = MacDur/(1+r) = 10/(1.05) = 9.52.

So shouldn't it be
9.52 * 613,913.25 / 100 = 58,444.54
?
You need to log in first to add your comment.