CFA Level I · CFA Level I Exam · Yield-Based Bond Duration Measures and Properties
A zero-coupon bond matures in exactly 10 years and has a yield to maturity of 5.00% per year, compounded annually. The bond's modified duration is closest to:
A zero-coupon bond's Macaulay duration equals its time to maturity, 10 years. Dividing by one plus the 5% yield gives a modified duration of about 9.52. Ten years ignores the yield adjustment, and 10.50 multiplies instead of dividing.
- A9.52Correct
- B10.00
- C10.50
Explanation
A zero-coupon bond's Macaulay duration equals its maturity, 10.00 years. Modified duration = 10 / 1.05 = 9.52. Option C multiplies by 1.05 instead.
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