Calculate the Duration of a 6%, $1,000 Par Bond Maturing

question 19

Multiple Choice

Calculate the duration of a 6%, $1,000 par bond maturing in three years if the yield to maturity is 10% and interest is paid semiannually.

• A) 1.35 years
• B) 1.78 years
• C) 2.50 years
• D) 2.78 years
• E) 2.95 years

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Definitions:

Variable Cost

Costs that change in proportion to the level of activity or volume of goods produced in a business.

Marginal Cost

The increase in cost that arises from producing one additional unit of a good or service.

Total Variable Cost

The sum of all variable costs associated with the production of a given level of output.

Total Fixed Cost

The sum of all costs required to produce any product or service that does not change with the level of output.