📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!

  • google app store apple app store
  • ✖

      Question

      What will be the bond’s duration if the price of the

      bond fell by 5% as a result of 0.4% rise in the market yield?
      A 5 years Correct Answer Incorrect Answer
      B 8.33 years Correct Answer Incorrect Answer
      C 10 years Correct Answer Incorrect Answer
      D 12.5 years Correct Answer Incorrect Answer
      E None of the above Correct Answer Incorrect Answer

      Solution

      Duration is defined as the sensitivity of the bond price to the change in interest rates. Thus Duration can be given as Duration = % change in price/change in yield                                     = 5%/0.4% = 12.5 years

      Practice Next

      Relevant for Exams:

      ask-question