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An annual coupon bond has a coupon rate of 8%, face value of $100, and 3 years to maturity. If its yield to maturity is 3.2%, what is its Macaulay Duration? Answer in years, rounded to three decimal places. Type your numeric answer and submit

An annual coupon bond has a coupon rate of 8%, face value of $100, and 3 years to maturity. If its yield to maturity is 3.2%, what is its Macaulay Duration? Answer in years, rounded to three decimal places. Type your numeric answer and submit

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Question 7 ... Homework • Unanswered An annual coupon bond has a coupon rate of 8%, face value of $100, and 3 years to maturity. If its yield to maturity is 3.2%, what is its Macaulay Duration? Answer in years, rounded to three decimal places. Type your numeric answer and submit
Transcribed Image Text:Question 7 ... Homework • Unanswered An annual coupon bond has a coupon rate of 8%, face value of $100, and 3 years to maturity. If its yield to maturity is 3.2%, what is its Macaulay Duration? Answer in years, rounded to three decimal places. Type your numeric answer and submit
Expert Solution
Step 1 Calculation of Macaulay Duration-
Period Cash Flow ($) PVF @3.2% PV of cash flow ($) PV of time weighted cash flow ($)
1 8 0.9690 7.752 7.752
2 8 0.9389 7.5112 15.0224
3 108 0.9098 98.2584 294.7752
      113.5216 317.5496

 

Macaulay Duration=$317.5496$113.5216=2.797 years

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