Compute the duration for bond c

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Compute the duration for Bond C below (and think about the ranking of the bonds on the basis of their price volatility). The current rate of interest is 8%, so the prices of bonds A and B are $1,000 and $1,268 respectively.

Bond A: 8% coupon, 10 year term, duration of 7.25

Bond B: 12% coupon, 10 year term, duration of 6.74

Bond C: 8% coupon, 5 year term, duration:?

[Exam Prep: Confirm your findings by calculating the percentage change in the price of each bond when interest rates rise from 8 to 12 percent (A now worth $774 and B worth $1000)]

Reference no: EM132697987

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