by 25 basis points the price of the bond falls to 1100 What

by 25 basis points the price of the bond falls to $1,100 What s he duration of this boed? (00 not round intermediate calculations. Round your answer to 4 decimal places.)

Solution

Duration of the bond= (?P/P)* [(1+ rate)/?rate] where ?P= $1130-$1100= $30 P= $1130 Rate= 6% ?rate= 25 basis points Duration of the bond= -($30/$1130)* [(1+ .06)/.0025] Duration of the bond=- (.0265)* [(1 .06)/.0025] Duration of the bond=- 11.256 The negative sign denotes decrease in maturity