The face value is $1,000, the price is $300 and yield to maturity is 8%.
2007-05-27 10:09:26 · 2 answers · asked by ~:○ iMM ~:○ 4 in Business & Finance ➔ Other - Business & Finance
The maturity date should be specified.
The duration is the weighted average maturity time of a bond cash flow. For a zero-coupon the duration will be ΔT = Tf − T0, where Tf is the maturity date and T0 is the starting date of the bond. If there are different cash flows Ci the duration of every cash flow is ΔTi = Ti − T0. Being r the rate of the bond, continuously compounded, the price of the bond is
V = \sum_i C_i e^{-r\Delta T_i}
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2007-05-27 10:54:55 · answer #1 · answered by zurioluchi 7 · 0⤊ 1⤋
The present value of 1000 at 8% is 300 in n years:
300=1000/1.08^n, assuming annual compunding.
1.08^n=3.33
LN1.08^n=LN3.33
nLN1.08=LN3.33
n=LN3.33/LN1.08 = 1.203/.077 = 15.62
2007-05-27 11:02:09 · answer #2 · answered by fcas80 7 · 1⤊ 0⤋