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The Clarence Corporation has issued bonds that pay semiannually with the following characteristics: ...

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Finance

The Clarence Corporation has issued bonds that pay semiannually with the following characteristics:

Coupon Yield to Maturity Maturity Macaulay Duration
10% 10% 12 7.24 years

Calculate modified duration using the information provided. Do not round intermediate calculations. Round your answer to two decimal places. Use only the data provided in the table above (in the problem statement) for your calculations.

years

What is a better measure when calculating the bond's sensitivity to changes in interest rates?

(Maturity/Modified duration) is a better measure of the bonds sensitivity to changes in interest rates as (Maturity/Modified duration) considers only the final cash flow, while (Maturity/Modified duration) includes other factors.

Identify the direction of change in modified duration if:

the coupon of the bond were 8%, not 10%.

Modified duration (decreases/increases) as the coupon decreases.

the maturity of the bond were 6 years, not 12 years.

Modified duration (decreases/increases) as maturity decreases.

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