CFA Practice Question

CFA Practice Question

A bond has 3 years to maturity, a coupon rate of 5% annually, coupons paid annually. The YTM is 4.5%. The Modified Duration of the bond is (use 1 bp change in your computations):
A. 2.89
B. 3.11
C. 2.73
Explanation: Duration = (V- - V+)/(V0 * 2 * dV), change the price of the bond by changing yield 1/100 of 1% in both directions to get V- and V+

User Contributed Comments 5

User Comment
chantal I get 2.73 on Modified Duration and 2.71 on effective duration. Anyone?
JCopeland That is correct 2.73 for Modified.
Sandar how u calculate modified duration
andrewmorgan this is effective not modified
harrybay So according to this question modified and effective is pretty much the same?
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