Problem 54.1 Find the modified duration of a 30-year, $1,000 face value, 6% annual coupon bond. Assume an effective annual interest rate of 9%.
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Step 1
To calculate the present value of the bond, we need to discount each cash flow (coupon payments and face value) by the appropriate discount rate. Since the bond has a 6% annual coupon rate and a 9% effective annual interest rate, we can use the following formula Show more…
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