Manually compute the modified duration for the following bond: Maturity Date: 04/20/2017 Settlement Date: 02/05/2016 Coupon...

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Question

Maturity Date: 04/20/2017

Settlement Date: 02/05/2016

Coupon Rate: 10%

Coupon Frequency: Semiannual

Yield-to-Maturity: 12%

Day Count Convention: 30/360 (European)

business finance

Answer 1

Answer #1

T	360/2	180
t	25+30+20	75

Period	Time to reciept	Cashflow	Present value	Weight	Time * Weight
n	n - t/T	CF	CF/1.12^n	CFn/Sum(CF)
1	0.583333333	5	4.464285714	0.062682904	0.036565027
2	1.583333333	5	3.985969388	0.055966878	0.088614224
3	2.583333333	5	3.558901239	0.049970427	0.12909027
4	3.583333333	5	3.177590392	0.044616453	0.159875622
5	4.583333333	5	2.837134279	0.039836118	0.182582209
6	5.583333333	105	53.19626772	0.74692722	4.170343647
			71.22014874	1	4.767070998


Mac Dur	*(TimeWeight)/No. of coupon payments per year**	2.383535499
Mod Dur	Mac Dur/(1+coupon%/No. coupon payments per year)	2.270033809

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Answer 2

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