Calculate the duration of a bond using the cash flow approach shown in the spread- sheet below. This bond has a current price of $974.47, a coupon of 5.5 percent, and a maturity of five years. The YTM on this bond is 6.10 percent.

Use three decimal places for the last two rows of the spreadsheet. Refer to the example for calculating duration in Chapter 18. Note that the duration of this bond is the sum of the values found in the last row of the spreadsheet.

Annual coupon 55

YTM 6.10%

Current price 974.47

Maturity value 1000

Period 0 1 2 3 4 5 6 7 8 9 10

Time in years 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

Cash flows

PV of cash flows

Weighted PV of cash flows

Weighted average of time periods

Duration = Sum of row 13