A Corporate Bond Returns 12% of Its Cost (In PV

Multiple Choice

A corporate bond returns 12% of its cost (in PV terms) in the first year, 11% in the second year, 10% in the third year and the remainder in the fourth year. What is the bond's duration in years?

A) 3.68 years
B) 2.50 years
C) 4.00 years
D) 3.75 years
E) 3.32 years 3.32 = (12% * 1) + (11% * 2) + (10% * 3) + (67% * 4)