Part 2: Duration and Rate of Return

Consider a five-year $1,000 face value, Treasury bond with a 5 percent semiannual coupon selling at par.

Calculate the duration if the yield to maturity is 7% (5 Points)

Calculate the duration if the yield to maturity is 12% (5 Points)

Calculate the duration if the yield to maturity is 17% (5 Points)

Plot the relationship between yield to maturity (x-axis) and the duration (y-axis). Be sure to label the y-axis, x-axis, and chart title (5 Points)

In your report, identify and comment on the relationship between duration and yield to maturity.