Using excel, illustrate and check the following observations on the duration of bonds.

1. The duration of a zero-coupon bond equals its time to maturity

2. With time to maturity and yield to maturity held constant, a bond's duration and interest rate sensitivity are higher when the coupon rate is lower

3. With the coupon rate held constant, a bond's duration and interest rate sensitivity generally increase with time to maturity. Duration always increases with maturity for bonds selling at par or at a premium to par.

4. With other factors held constant, the duration and interest rate sensitivity of a coupon bond are higher when the bond's yield to maturity is lower.

5. The duration of a level perpetuity is: (1+y)/y

You can make up the excel macros