A bond with duration of 10 years has a yield to maturity of 10 percent. This bond's volatility (modified duration)is
A)9.09 percent.
B)6.80 percent.
C)14.6 percent.
D)10.00 percent.

Question

Quizplus · Accepted Answer

The volatility or modified duration of a bond can be calculated as the Macaulay duration divided by (1 + yield/number of coupon periods per year). Assuming annual coupon payments for simplicity, the modified duration = 10 / (1 + 0.10) = 9.09%.

A Bond with Duration of 10 Years Has a Yield