Duration and Rate of Return
On an excel spreadsheet:
Consider a five-year $1,000 face value, Treasury bond with a 10 percent semiannual coupon selling at par.
1) Calculate the duration if the yield to maturity is 10%
2) Calculate the duration if the yield to maturity is 12%
3) Calculate the duration if the yield to maturity is 14%
4) Plot the relationship between yield to maturity (x-axis) and the duration (y-axis). Be sure to label the y-axis, x-axis, and chart title
In your report, identify and comment on the relationship between duration and yield to maturity.