I was just wondering if the effect of duration will always take into account the dirty price (quoted price + accrued interest) when a bond is between coupon payments? Is it the same when calculating the YTM? Using the information in Table 2, Klein would like to compute the duration of the highlighted bond. Which is the closest to Klein’s answer? A) 8.88. B) 12.11. C) 9.06. Your answer: B was incorrect. The correct answer was A) 8.88. PVBP = (0.0001) × D × (price + accrued interest) × 10,000 Note: The 10,000 is to convert the price to $1,000,000 par to match the PVBP units. Rearranging, D = PVBP ÷ (price + interest) = 1,211.2284 ÷ (133.75 + 2.5824) = 8.88
That answer would imply that it does.
Well said Hank!
dirty dirty south