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What duration does a 1 year corporated bond with a 5 percent coupon have relative to a t bill?
Wiki User
∙ 11y ago
That would depend on the yield and the coupon frequency, but assuming the corporate bond and T-Bill have the same maturity (1 year) and the bond pays a semi-annual coupon, while the T-Bill pays all at maturity and has a lower yield that the bond, the duration on the corporate bond would be (slightly) lower.
As an example;
1) A T-bill with 1 year Maturity an a yield of 0.20% would have a Modified Duration (the best to use) of close to 1.00
2) A 'Par' Corporate bond with a 5% semi-annual coupon would have a Modified Durationof 0.96 years.
This effect will be more prominent with longer maturity bonds.
Wiki User
∙ 11y ago
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