CFA Practice Question

There are 266 practice questions for this study session.

CFA Practice Question

What is the modified duration on a noncallable bond with a Macaulay duration of eight years, a yield to maturity of 7%, and quarterly coupon payments?
A. 8.09
B. 7.93
C. 7.86
Explanation: Modified duration is equal to (Macaulay duration) / [1 + (current yield to maturity / number of payments in a year)]. In this question, the modified duration is 8 / [1 + (0.07/4)] = 7.86.

User Contributed Comments 6

User Comment
Aimy Eight years means Macalay duration is 8?
TheRoon Yep!
dwadd Copied right from the LOS: Modified Duration = Macaulay Duration / (1 + yield/k)
where k is the number of periods, or payments per, year, and yield is the yield to maturity of the bond. For level 1 exam, you don't need to memorize this equation.
jpducros note that k is the number of period per year, not the number of periods over the bond period.
belebala isn't modified duration calculation out of scope of Level 1?
tomalot Not for 2015 anyways, click on the LOS button for details
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