Q.20I
Expert-verifiedFind the bond duration with a settle ement date of May 27, 2012, and a maturity date of November 15, 2021. The bond’s coupon rate is 7%, and the bond pays coupons semi-annually.
The bond is selling at a yield to maturity of 8%. You can use Spreadsheet 11.2, available at www.mhhe.com/bkm; link to Chapter 11 material.
Answer
Macaulay Duration | 6.965883415 |
Modified Duration | 6.697964822 |
Settlement Date | 27-05-2010 |
Maturity Date | 15-11-2019 |
Coupon rate | 0.07 |
Yield to maturity | 0.08 |
Coupons per year | 2 |
To calculate the bond’s duration in excel, we can use the formulae given in the screenshot.
S.no. | Inputs | |
1 | Settlement Date | 27-05-2012 |
2 | Maturity Date | 15-11-2021 |
3 | Coupon rate | 0.07 |
4 | Yield to maturity | 0.08 |
5 | Coupons per year | 2 |
Outputs | ||
Macaulay Duration | 6.965883415 | |
Modified Duration | 6.697964822 |
Fill in the table below for the following zero-coupon bonds, all of which have par values of $1,000
Price | Maturity (years) | Yield to Maturity |
$400 | 20 | ? |
$500 | 20 | ? |
$500 | 10 | ? |
? | 10 | 10% |
? | 10 | 8% |
$400 | ? | 8% |
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