A seven-year par value bond has a coupon rate of 9% (paid annually) and a modified duration of A. 7 years. B. 5.49 years. C. 5.03 years. D. 4.87 years.

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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.