4. (EXCEL TEMPLATE) a) Use the Present Value (PV) function to find the duration
ID: 2768028 • Letter: 4
Question
4. (EXCEL TEMPLATE)
a) Use the Present Value (PV) function to find the duration of a $1000 face value, 25-year, annual coupon bond with an 4.25 percent coupon rate and a 5.75 percent yield to maturity.
b) Use the Duration Function to find the duration of the bond listed above. After clicking on Duration, go to "Help on this Function" to determine the proper entries.
a) Use the Present Value (PV) function to find the duration of a $1000 face value, 25-year, annual coupon bond with an 4.25 percent coupon rate and a 5.75 percent yield to maturity.
b) Use the Duration Function to find the duration of the bond listed above. After clicking on Duration, go to "Help on this Function" to determine the proper entries.
1 DURATION Weight Time x Weight 12 13 10 15 16 12 13 14 16 17 18 19 20 21 19 21 23 23 24 25 25 27 28 29 30 Use the Duration Function to find the duration of the bond listed above. After clicking on Duration, go to 31 "Help on this Function" to determine the proper entries. 32 DurationExplanation / Answer
Where PV factor = (1+r)^n
PV = cash flow/PV factor
Duration formula used:
=Duration(start date ,end date, coupon rate, yield rate,frequency)
start date entered in general format = 42005 corresponding to 1/1/2015
end date entered in general format 51136 corresponding to 1/1/2040
Frequency = 1 because of annual coupon bond
Rate 5.75% Time Pmt PV factor PV Weight Time*Weight 1 42.5 1.0575 40.1891253 40.18913 40.1891253 2 42.5 1.118306 38.00390099 38.0039 76.00780198 3 42.5 1.182609 35.93749502 35.9375 107.8124851 4 42.5 1.250609 33.98344683 33.98345 135.9337873 5 42.5 1.322519 32.13564712 32.13565 160.6782356 6 42.5 1.398564 30.38831879 30.38832 182.3299128 7 42.5 1.478981 28.73599886 28.736 201.151992 8 42.5 1.564023 27.17352138 27.17352 217.388171 9 42.5 1.653954 25.6960013 25.696 231.2640117 10 42.5 1.749056 24.2988192 24.29882 242.988192 11 42.5 1.849627 22.97760681 22.97761 252.7536749 12 42.5 1.95598 21.72823339 21.72823 260.7388007 13 42.5 2.068449 20.5467928 20.54679 267.1083064 14 42.5 2.187385 19.4295913 19.42959 272.0142782 15 42.5 2.31316 18.37313598 18.37314 275.5970397 16 42.5 2.446167 17.37412386 17.37412 277.9859818 17 42.5 2.586821 16.42943155 16.42943 279.3003363 18 42.5 2.735563 15.53610548 15.53611 279.6498987 19 42.5 2.892858 14.6913527 14.69135 279.1357013 20 42.5 3.059198 13.89253211 13.89253 277.8506421 21 42.5 3.235101 13.1371462 13.13715 275.8800702 22 42.5 3.42112 12.42283329 12.42283 273.3023323 23 42.5 3.617834 11.74736008 11.74736 270.1892819 24 42.5 3.82586 11.10861473 11.10861 266.6067536 25 1042.5 4.045846 257.6716642 257.6717 6441.791606 Sum= 803.6088 11845.64842 Duration= 11845.64/803.6088 14.74056584 Duration= 14.74057Related Questions
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