What is the macaulay duration of this bond

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1. A perpetuity will pay cash flows of $10,000, in real dollars, every year indefinitely starting next year. If the prevailing nominal interest rate is 4.0%, and inflation rate is 1.5% (both forever), what is the PV of this perpetuity?

2. A 4-year coupon bond pays $1,000 in each of the first 3 years, then $6,000 (which includes the $5,000 principal in year 4). What is the plain duration of this bond?

3. A 4-year coupon bond pays $800 in each of the first 3 years, then $5,800 (which includes the $5,000 principal in year 4). What is the Macaulay duration of this bond if the prevailing interest rate is 5%?

Reference no: EM131964209

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