A Bond Has a Macaulay Duration of 4

question 30

Multiple Choice

A bond has a Macaulay duration of 4.5,a yield to maturity of 5.1 percent,a coupon rate of 6.0 percent,and semiannual interest payments.What is the bond's modified duration?

• A) 3.59 years
• B) 4.39 years
• C) 4.92 years
• D) 5.06 years
• E) 5.26 years

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Definitions:

Interest Rate

The percentage of a loan amount that is applied as interest for the borrower, usually shown as an annual rate of the remaining loan balance.

Present Value

The present worth of a future amount of money or series of cash flows when a particular return rate is applied.

Semiannually

Occurring twice a year, typically every six months, often used in the context of interest or dividend payment schedules or reporting periods.

Annual Interest Rate

The percentage rate charged or paid over a year for borrowing or saving money.