# What is the duration of a 14% coupon bond making annual coupon payments if it has three years...

## Question:

What is the duration of a 14% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 9%?

## Bond Duration:

One way to measure a bond's interest rate risk is the Macaulay duration. This statistics indicates the percentage change in bond price for a given one percentage change in the bond's yield to maturity.

## Answer and Explanation:

Become a Study.com member to unlock this answer! Create your account

The duration of the bond is 2.67.

We can use the following formula to compute the Macaulay duration:

• {eq}\displaystyle \frac{\displaystyle...

See full answer below.

#### Learn more about this topic: Interest Rate Risk: Definition, Formula & Models

from

Chapter 3 / Lesson 6
11K

Interest rate risk is really the risk of two different events (price reduction and reinvestment rate reduction) caused by a change in interest rates. Interest rate risk affects bond investments, but the good news for bond investors is that it can be mitigated or eliminated.