9-95 What is the duration of this bond?
A)5 years.
B)4.31 years.
C)3.96 years.
D)5.07 years.
E)Not enough information to answer.

Question

Quizplus · Accepted Answer

By using the duration formula, we can calculate the duration of the bond. 
Duration = (1/1+y)[1 - (1+y)^(-n)]/y + n(1+y)^(-n)/(1+y)
Where y = yield to maturity = 0.08, n = number of periods = 5, and the coupon payments are semi-annual. 
Plugging in the values, we get duration = 4.31 years. Therefore, the correct answer is B.

9-95 What Is the Duration of This Bond