onsider a bond with one year remaining to maturity, a $1,000 face value, an 8 percent coupon rate (paid semi-annually), and an interest rate (either required rate of return or yield to maturity) of 20 percent. What is the duration of the bond

onsider a bond with one year remaining to maturity, a $1,000 face value, an 8 percent coupon rate (paid semi-annually), and an interest rate (either required rate of return or yield to maturity) of 20 percent. 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

Consider a bond with one year remaining to maturity, a $1,000 face value, an 8 percent coupon rate (paid semi-annually), and an interest rate (either required rate of return or yield to maturity) of 20 percent. What is the duration of the bond?

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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