Bond Duration and Bond Sensitivity Analyses
finance
Description
Bond Duration and Bond Sensitivity Analyses
Name______________________________________________ID________Class________Section_____
Consider the following information of a bond:
Market Price (PV) = $______
Coupon Rate = ______%
Maturity = ______ years
Payment Frequency (M) = semi-Annual
Compute: (1. Show computations. 2.
Do not type this assignment)
1)
YTM =
__________%
2)
Duration =
__________Years
3)
Modified Duration = __________Years
4)
Change in price =
__________Amount ($)
5)
Percentage change in price = __________%
|
N |
PMT |
CF |
PVCF CF/(1+YTM)N |
PVCF * N |
Probability (PVCF/Price
) |
Semi-Annual
(Probability * PMT) |
Duration
(Probability * N) |
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1. Compute YTM
FV =
PV =
PMT = Coupon Rate * FV/M =
N * M =
CPT I (YTM) = Semi–Annual
YTM =
Annual
YTM = Semi-Annual *2 =
2. Compute Duration
A. Annual Duration (from
table)
B. Annual Duration (Sum
of PVCF * N) / (Sum of PVCF)
C.
Semi Duration (Annual Duration /2)
3. Compute Modified Duration (MD)
a. Annual MD Annual Duration /(1+YTM)
B. Semi–Annual MD Annual Duration
/ 1 + (YTM/2)
4. Change in Price (150 basis point increase in
interest rate)
Beginning Price Ending Price
FV = FV =
PV (Price) = CPT PV (Price)
=
PMT = PMT =
N = N =
CPT YTM = YTM =
a)
Change in
Price = Ending Price – Beginning Price =
b) Percentage
change in price = (Change in
Price/Beginning Price) 100
