A bond with 3 years to maturity and a coupon of 6.25 percent is currently selling at $932.24. Assume annual coupon payments.

Yield to Maturity = 8.92%

1. Compute its duration using Equation 5.7 and the

yield-to-maturity calculated above as the discount rate.

r bond investments. How can we measure in bond price volatility varies directly with m od measure of interest rate risk should acc re of interest rate risk (or bond price volatilit -y is duration. Duration is a weighted aver ond's cash flows is received. Using annual o D= 5.CF() CF () 1(1+i) (1+i)' CF, = (1+i) PB t=1 + principal payment) at time t principal or coupon interest is paid