Example 1 Eurobonds pay coupons annually. Suppose the annual coupon is 8%, the face value of the six years bond is $1,000, and the current yield to maturity (R) is also 8%. What is the duration of the bond?

Example 1 Eurobonds pay coupons annually. Suppose the annual coupon is 8%, the face value of the six years bond is $1,000, and the current yield to maturity (R) is also 8%. What is the duration of the bond?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 4MC

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

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Example 1
Eurobonds pay coupons annually. Suppose the annual coupon is 8%, the face value
of the six years bond is $1,000, and the current yield to maturity (R) is also 8%.
What is the duration of the bond?

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