(Financial Institutions and Markets)

Find the duration for a corporate bond pays 7% coupon interest, paid semiannually, if the bond matures after 3 years and has 5% yield to maturity, face value is $1000. Explain your answer.

P0= Current price of the security

t = 1 to T, the period in which a cash flow is received

T = the number of years to maturity

CFt = cash flow received at end of period t

r = yield to maturity or required rate of return

PVt = present value of cash flow received at end of period t