fm3_chapter25

fm3_chapter25 - UN-15BBASIC DURATION

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Unformatted text preview: UN-15BBASIC DURATION CALCULATIONYTM7%Year1700.06541300.0855#MACRO?2700.12231300.1598#MACRO?3700.17141300.22404700.21361300.27915700.24951300.32606700.27991300.36577700.30511300.39878700.32591300.42589700.34271300.44771010705.439311304.0413Bond price1,000.00#MACRO?1,421.41#MACRO?Duration7.5152#MACRO?6.7535#MACRO?Bond A7.5152#MACRO?#MACRO?#MACRO?Bond B6.7535#MACRO?#MACRO?#MACRO?Ct,At*Ct,A/PriceA*(1+YTM)tCt,Bt*Ct,B/PriceB*(1+YTM)tUsing the Excel function Duration and the "home-made" function DdurationABCDEFG123456789101112131415161718192021222324Discount rate7%Bond ABond BCoupon rate7%Coupon13%Face value1,000Face value1,000Maturity10Maturity10Price1,000.00Price1,421.41Duration7.5152Duration6.7535New discount rate7.70%New price952.391,360.50Change in priceActual47.6160.9249.1762.8049.1762.80DURATION AS PRICEThe change in the bond price cP - Duration*PriUsing duration as approximationDP - Duration *Price*r/(1+r)Using MDurationABCDE12345678910111213141516171819#MACRO?#MACRO?#MACRO?#MACRO?#MACRO?#MACRO?E ELASTICITYcan be approximated byice*r/(1+r)F12345678910111213141516171819N, bond maturity10r, 7%C, bond coupon13%Face value1,000Price1,421.41#MACRO?...
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fm3_chapter25 - UN-15BBASIC DURATION

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