Bond duration convexity practice problems

Bond duration convexity practice problems - UNIVERSITY OF...

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UNIVERSITY OF ILLINOIS College of Business - Department of Finance Finance 300 (Financial Markets) (t periods) Coupon (C$) PV (C$) Duration (D i ) Convexity (C i ) 1 $30.00 $29.41 0.0253 0.0506 2 $30.00 $28.84 0.0496 0.1487 3 $30.00 $28.27 0.0729 0.2916 4 $30.00 $27.72 0.0953 0.4764 5 $30.00 $27.17 0.1168 0.7006 6 $30.00 $26.64 0.1374 0.9616 7 $30.00 $26.12 0.1571 1.2570 8 $30.00 $25.60 0.1761 1.5845 9 $30.00 $25.10 0.1942 1.9417 10 $30.00 $24.61 0.2115 2.3267 11 $30.00 $24.13 0.2281 2.7373 12 $30.00 $23.65 0.2440 3.1716 13 $30.00 $23.19 0.2591 3.6276 14 $30.00 $22.74 0.2736 4.1036 15 $30.00 $22.29 0.2874 4.5979 16 $30.00 $21.85 0.3005 5.1088 17 $30.00 $21.42 0.3130 5.6347 18 $30.00 $21.00 0.3250 6.1741 19 $30.00 $20.59 0.3363 6.7256 20 $30.00 $20.19 0.3470 7.2878 Face Value = $1,000.00 $672.97 11.5679 242.9261 Bond Price (∑ PVCF) = $1,163.51 ∑/2 = Duration (Years) ∑/4 =Convexity (Years 2 ) 7.859 75.459 Years to Maturity Coupon Rate Market Rate (YTM %) Current Yield Modified Duration Price Change (MD Only) Convexity Correction Price Change (MD +C.C.) -Duration/[1+y/n] + 1.00% YTM 1/2 *[Convexity/ (1+y/n) 2 ] + 1.00% YTM 10.00 6.00% 4.00% 5.16% -7.705% -$89.65 36.264 -$85.43
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Semi-Annual Coupon Bond Convexity $400.00 $600.00 $800.00 $1,000.00 $1,200.00 $1,400.00 $1,600.00 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% Yield Estimate Actual Price Duration Only C.C. Estimate Actual Price Duration Only Estimate YTM % MD + CC Estimate Actual Price M. Duration Only Estimate 0.0% $1,589.61 $1,600.00 $1,515.21 1.0% $1,470.43 $1,474.69 $1,427.28 2.0% $1,359.69 $1,360.91 $1,339.36 3.0% $1,257.38 $1,257.53 $1,251.44 4.0% $1,163.51 $1,163.51 $1,163.51 5.0% $1,078.09 $1,077.95 $1,075.59 6.0% $1,001.10 $1,000.00 $987.67 7.0% $932.55 $928.94 $899.75 8.0% $872.44 $864.10 $811.82 9.0% $820.76 $804.88 $723.90 10.0% $777.53 $750.76 $635.98 11.0% $742.74 $701.24 $548.05 12.0% $716.38 $655.90 $460.13 Face Value (FACE) Coupon Rate (CR) Market Rate (YTM) Maturity (t) # Coupons (n) $1,000.00 6.00% 4.00% 10.00 Semi-Annual 1 2 3
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Bond duration convexity practice problems - UNIVERSITY OF...

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