## 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)

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