to find each bond’s duration. He will then use the volatilityduration equation, V = D/(1 + r ), to find bond volatility.

(Answer: The durations of bonds A, B, C, and D are 1.88, 4.15, 6.86, and 5.0 respectively – showing that bond C is the most volatile. The bonds’ volatilities (1.71, 3.77, 6.24, and 4.55) confirm this fact.)