Once upon a time, the treasurer of Mighty Corporation (MCO) decided to issue a bond (hereafter The bond ) The bond would have a 20 year life and promised that the holder of the bond would receive 20 annual payments of $80, Along with the 20 th payment, MCO promised to return the principal of $1,000 In other words, the final payments received at maturity would be ($1000 $80) $1080 On the day it is issued, the Coupon Yield is 80 1000 8 On the day it is issued, the Yield to Maturity (YTM) is 8 The bond is bought by an insurance company One year passes, the bond has made its first coupon payment, and the interest rate yield to maturity on the bond falls to 6 A) What is the Coupon Yield on the bond B) The bond now has 19 years left Calculate the Macaulay duration of the bond

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Once upon a time, the treasurer of Mighty Corporation (MCO) decided to issue a bond (hereafter: The bond ) The bond would have a 20-year

Once upon a time, the treasurer of Mighty Corporation (MCO) decided to issue a bond (hereafter: The bond) The bond would have a 20-year life and promised that the holder of the bond would receive:

20 annual payments of $80,
Along with the 20^th payment, MCO promised to return the principal of $1,000. In other words, the final payments received at maturity would be ($1000+$80) = $1080.
On the day it is issued, the Coupon Yield is 80/1000= 8%
On the day it is issued, the Yield-to-Maturity (YTM) is 8%

The bond is bought by an insurance company. One-year passes, the bond has made its first coupon payment, and the interest rate/yield-to-maturity on the bond falls to 6%.

A) What is the Coupon Yield on the bond?

B) The bond now has 19 years left. Calculate the Macaulay duration of the bond.