Effective Duration required, following, question, effective

jlg1982

For the following question, would you say 1.5 minutes is enough for all the required calculations?

A non-callable bond with 18 years remaining maturity has an annual coupon of 7% and a $1,000 par value. The current yield to maturity on the bond is 8%. Which of the following is closest to the effective duration of the bond?

A) 8.24.
B) 11.89.
C) 9.63.

Give it a try.

Beatnik

use bond function on your calc. (if you do not know how, learn it)

2nd bond
SDT=1.0100
CPN=7
RDT=1.0118
RV=100
ACT
1/Y => needs to be changed
YLD=8
PRI=90.628 (when you hit compute)
Two down arrows later -> DUR -> CPT -> 9.63


, 30 secs - ans = 9.63

CP

Mechanic

To CP:It's applicable for BAII Pro only.

Trang

ramdabom

Thanks for the calculator tip CP. Calculating three bond prices and then computing the effective duration formula will definitely rob time.

Penny-wenny

Very smart, thanks CP

Trang