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? |