Explanation:
Money duration (also called dollar duration) is calculated as:
Money Duration = Modified Duration × Full Price
Where:
Step 1: Calculate Full Price Full Price = Flat Price + Accrued Interest Full Price = 92.084 + 1.458 = 93.542
Step 2: Calculate Money Duration Money Duration = Modified Duration × Full Price Money Duration = 7.534 × 93.542
Step 3: Perform Calculation 7.534 × 93.542 = 704.94 ≈ 705
Step 4: Check Options The calculation gives approximately 705, which matches option C.
However, let's double-check: The question asks for money duration per 100 of par value, and we've used the correct formula. The answer should be C. 705.
Key Points:
Ultimate access to all questions.
An analyst gathers the following information about a bond:
| Annual modified duration | 7.534 |
|---|---|
| Flat price (per 100 of par value) | 92.084 |
| Accrued interest (per 100 of par value) | 1.458 |
The bond's money duration per 100 of par value is closest to:
A
B
C
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