Bond Pricing & Duration Rules 41810

Bond Pricing - Rules for Bond Pricing Term to Maturity Coupon 8 5 years 15 years 25 years PV of PV of Market PV of PV of Market PV of PV of Market

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Unformatted text preview: Rules for Bond Pricing Term to Maturity Coupon 8% 5 years 15 years 25 years PV of PV of Market PV of PV of Market PV of PV of Market Annuity Final Payment Price Annuity Final Payment Price Annuity Final Payment Price Yield to Maturity 6% $336.99 $747.26 $1,084.25 $776.98 $417.27 $1,194.25 $1,022.67 $233.00 $1,255.67 8.4% 19.4% 25.6% 8% $319.42 $680.58 $1,000.00 $684.76 $315.24 $1,000.00 $853.98 $146.02 $1,000.00 10% $303.26 $620.92 $924.18 $608.49 $239.39 $847.88 $726.16 $92.30 $818.46-7.6%-15.2%-18.2% Relevant bond pricing rules: #1. #2. #3. #4. Rules for Bond Pricing Rule #5. Yield to Coupon Yield to Yield to Coupon Yield to Maturity Rate Maturity Maturity Rate Maturity 4.00% 6.00% 8.00% 12.00% 14.00% 16.00% Term to Maturity 5 years $1,089.04 $1,000.00 $920.15 $1,072.10 $1,000.00 $934.51 15 years $1,222.37 $1,000.00 $828.81 $1,136.22 $1,000.00 $888.49 25 years $1,312.44 $1,000.00 $786.50 $1,156.86 $1,000.00 $878.06 Rule #6. Coupon 4.00% Initial Initial Yield Yield to Yield Yield Yield to Yield Changes to Maturity Changes to Changes to Maturity Changes to 4.00% 6.00% 8.00% 12.00% 14.00% 16.00% Price $1,000.00 $805.76 $657.62 $455.13 $385.78 $330.95 Duration Rule #1 Duration Rule #3 FABOZZI DURATION CALCULATION FABOZZI DURATION CALCULATION (V- minus V+) divided by (2 times Vo times delta y) (V- minus V+) divided by (2 times Vo times delta y) delta y 0.20% delta y 0.20% 0.20% 0.20% coupon 0% coupon 9% 7% 11% ytm 6% ytm 6% 6% 6% ttm 20 years ttm 20 years 30 years 10 years Vo 306.5568 Vo 134.6722 141.5133 122.3162 V- 318.7022 V- 137.5888 145.2458 124.0255 V+ 294.8855 V+ 131.8439 137.9295 120.6372 Duration 19.4227 Duration 10.6646 12.9251 6.9253 Duration Rule #2 Duration Rule #4 FABOZZI DURATION CALCULATION FABOZZI DURATION CALCULATION (V- minus V+) divided by (2 times Vo times delta y) (V- minus V+) divided by (2 times Vo times delta y) delta y 0.20% 0.20% 0.20% delta y 0.20% 0.20% 0.20% coupon 9% 7% 11% coupon 9% 9% 9% ytm 6% 6% 6% ytm 6% 4% 8% ttm 20 years 20 years 20 years ttm 20 years 20 years 20 years Vo 134.6722 111.5574 157.7869 Vo 134.6722 168.3887 109.8964 V- 137.5888 114.0958 161.0819 V- 137.5888 172.3877 112.0545 V+ 131.8439 109.0983 154.5895 V+ 131.8439 164.5163 107.8006 Duration 10.6646 11.1994 10.2867 Duration 10.6646 11.6864 9.6771 How good is duration at calculating the change in price when interest rates change?...
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This document was uploaded on 11/02/2011 for the course INVESTMENT 390 at Rutgers.

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Bond Pricing - Rules for Bond Pricing Term to Maturity Coupon 8 5 years 15 years 25 years PV of PV of Market PV of PV of Market PV of PV of Market

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