Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: UN-15BBASIC DURATION CALCULATIONYTM7%Year1700.06541300.08552700.12231300.15983700.17141300.22404700.21361300.27915700.24951300.32606700.27991300.36577700.30511300.39878700.32591300.42589700.34271300.44771010705.439311304.0413Bond priceDurationBond priceDuration$1,000 7.5152$1,421 6.7535=NPV(B3,B6:B15) =SUM(F6:F15)Excel formula7.5152<-- =DURATION(DATE(1996,12,3),DATE(2006,12,3),7%,B3,1)Approximating Price Changes Using DurationActualBondDPA-47.617.5152$1,000 0.007-49.17<-- =-C28*D28*E28/(1.07)B-60.926.7535$1,421 0.007-62.80Using Excel's MDuration formula:MDuration of bond A7.0236 <-- =MDURATION(DATE(1996,12,3),DATE(2006,12,3),7%,7%,1)0.007Bond price$1,000.0049.17MDuration of bond B6.3117 <-- =MDURATION(DATE(1999,10,31),DATE(2009,10,31),13%,7%,1)0.007Bond price1,42162.80 <-- =C42*C41*C40(in this case--10 years).Babcock's formulaN10 Bond maturityr7% Current market interest rateC13% Bond couponPrice1,421.41 <-- =PV(B51,B50,-B52*1000)+1000/(1+B51)^B50y9.15% Current yieldPVIF(r,N)7.02 <-- =PV(B51,B50,-1)D6.7535 <-- =B50*(1-B54/B51)+B54/B51*B55*(1+B51)Ct,At*Ct,A/PA*(1+YTM)tCt,Bt*Ct,B/PB*(1+YTM)t∆P∆r-DP∆r/(1+r)∆r-DP∆r/(1+r)Product of 3 terms above = -DP...
View Full Document

This note was uploaded on 02/02/2012 for the course BUSINESS 201 taught by Professor Acknan during the Spring '11 term at MIT.

Page1 / 5


This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online