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Calculate the maculay duration for this floating rate bond

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Reference no: EM132966156

You are considering a ten year bond with floating rate adjustable once a year at the end of each year. This means that the fixed rate period is one year. The bond pays 10% coupon ($50 coupon semiannually). The bond will pay two CF's in each one-year fixed rate period: one coupon 6 months from now and then the next coupon one year from now.

Problem 1: Assume the yield to maturity of this bond today is 12% and that today is the beginning of the year. Use the average time method to calculate the Maculay Duration for this floating rate bond (average time to receive CF during the one year fixed rate period).

Reference no: EM132966156

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