Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Management Posted 11 Feb 2018 My Price 5.00

Economic Meaning of Duration

You have discovered that when the required return of a bond you own fell by 0.50 percent from 9.75 percent to 9.25 percent, the price rose from $975 to $995. What is the duration of this bond? ( LG 3-8 )

( LG 3-8 )

Economic Meaning of Duration

So far we have calculated duration for a number of different bonds. In addition to being a measure of the average life of a bond, duration is also a direct measure of its interest rate sensitivity, or elasticity. 19 In other words, the larger the numerical value of duration ( D ), the more sensitive the price of that bond to (small) changes or shocks in interest rates. The specific relationship between these factors for securities with annual compounding of interest is represented as: 20

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Maurice Tutor
(5)
Status NEW Posted 11 Feb 2018 10:02 PM My Price 5.00

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