Chapter 20 - UN-15BBASIC DURATION

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

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Chapter 20 - UN-15BBASIC DURATION

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