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What is the duration for each five-year bond

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Reference no: EM13338337

An insurance company is analyzing three bonds and is using duration as the measure of interest rate risk. All three bonds trade at a yield to maturity of 10 percent, have $10,000 par values, and have five years to maturity. The bonds differ only in the amount of annual coupon interest they pay: 8, 10, and 12 percent.

a. What is the duration for each five-year bond?

b. What is the relationship between duration and the amount of coupon interest that is paid?

Reference no: EM13338337

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