Assignment#2 - Chapter 4 4-2 (a) PVBP PVBP=-MD*P*0.0001...

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Unformatted text preview: Chapter 4 4-2 (a) PVBP PVBP=-MD*P*0.0001 Bond A: -1.8149*0.0001*100=-0.0181 Bond B: -3.9944*0.0001*104.055=-0.0416 (b) Macaulay duration Using Excel functions (DURAION, MDURATION) D A =1. 1.887546 (=DURATION("2006/10/02","2008/10/02",0.08,0.08,2,1) D B = 4.154176 (=DURATION("2006/10/02","2011/10/02",0.09,0.08,2,1) (c) Modified duration MD A = 1.814948 (=MDURATION("2006/10/02","2008/10/02",0.08,0.08,2,1) MD B = 3.9944 (=MDURATION("2006/10/02","2011/10/02",0.09,0.08,2,1) (d) Approximate Duration: (P--P + )/2P o *(dY) D A =(100.3638-99.6379)/(2*100*0.002)=1.8148 D B =(104.8909-103.2283)/(2*104.055*0.002)=3.9947 Both durations by using approximate approach would be almost same as above. (e) Convexity As the course-note says, C A =4.28(where, c=4, y=0.04, n=4, p=100) C B =19.76 (where, c=4.5, y=0.04, n=10, p=104.55) (f) Approximate Convexity: (P--P + )-2P o /P o *(dY) 2 C A =4.28 100.3638+99.6379-(2*100)/100*(0.001) 2 C B =19.76 104.8909+103.2283-(2*104.055)/104.055*(0.001) 2 Both convexities by using approximate approach would be almost same as above.Both convexities by using approximate approach would be almost same as above....
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This note was uploaded on 03/28/2008 for the course FIN 853 taught by Professor Longchen during the Fall '06 term at Michigan State University.

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Assignment#2 - Chapter 4 4-2 (a) PVBP PVBP=-MD*P*0.0001...

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