Compute the macaulay duration for the two bonds

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Reference no: EM131183429

Consider these two bond for (assume that each bond pays interest semiannually):

• Bond A

– Coupon: 8%

– Yield to maturity: 8% – Maturity (years): 2

– Par: $100.00

– Price: $100.00

• Bond B

– Coupon: 9%

– Yield to maturity: 8% – Maturity (years): 5

– Par: $100.00

– Price: $104.055

(a) What is the price value of a basis point for bonds A and B?

(b) Compute the Macaulay duration for the two bonds.

Reference no: EM131183429

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