Calculate the Duration of a Two-Year Corporate Bond Paying 6

question 32

Multiple Choice

Calculate the duration of a two-year corporate bond paying 6 percent interest annually, selling at par.Principal of $20,000,000 is due at the end of two years.

• A)2 years.
• B)1.91 years.
• C)1.94 years.
• D)1.49 years.
• E)1.75 years.

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Definitions:

Periodic Inventory System

An accounting method where inventory levels and the cost of goods sold are determined at the end of the accounting period.

Average Cost

The total cost of producing goods divided by the number of goods produced, representing the per-unit cost.

Ending Inventory

The total value of goods available for sale at the end of an accounting period, after accounting for sales and new purchases.

LIFO Cost Method

A method of inventory valuation where the last items added to the inventory are considered the first ones sold.