A 10-Year Annual Coupon Bond Is Currently Selling for Its

question 51

Multiple Choice

A 10-year annual coupon bond is currently selling for its par value of $1,000 with an annual yield of 5%. If the bond is callable at par, what is the effective duration of the bond, if the interest rates change by 1%? The price of the bond at a 6% interest rate equals $926.40.

• A) 10 years
• B) 7.36 years
• C) 5.52 years
• D) 4.60 years
• E) 3.68 years

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