1. Calculate the duration of a 5-year bond that pays $60 annual coupons and has a 5% yield-to-maturity.
A. 5.20 years.
B. 4.76years.
C. 4.48 years.
D. 4.39 years.
2. Which of the following statements regarding a bond’s duration is incorrect?
A. Duration may be defined as the actual length of time needed to recover the initial bond investment.
B. Duration can be used as a measure of the bond’s sensitivity to interest rate (yield) changes.
C. For a bond that does not pay coupons, the duration is the same as its maturity.
D. The higher the coupon rate, the longer the duration, other things equal.