A ford motor co coupon bond has a coupon rate of31a face, Ask an Expert

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A Ford Motor Co. coupon bond has a coupon rate of3.1?%,a face value of $1,000?,and pays annual coupons. The bond will mature in 4 years. The? bond's yield-to-maturity is5.9?%.

What is this? bond's Macaulay Duration? (MacD)?

?(Hint: Covered in Chapter 7 slides 43 and 44.

Step? 1: Find the coupon amounts and draw the cash flow timeline.

Step? 2: Compute the? bond's price using Eq.? 7.10, which discounts each cash flow one by one from Step 1 at the? bond's yield-to-maturity.

Step? 3: Multiply each cash? flow's present value from Step 2 with that cash? flow's duration. For? example, the coupon to be paid in 2 years has a duration of 2.

Step? 4: Add up the terms from Step 3 and divide the sum by the? bond's price from Step2. This is the? bond's MacD).

MacD of the bond is ___ years.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92093229

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