Financial Markets/Investments
Dr. Rhoda
Duration Worksheet
Calculate the duration for each of the following bonds.
Assume annual compounding and a face value of $1000
Bond	Coupon	Begin Date	End Date	Maturity (years)	Yield	Price		Duration
1 (Base)	8%	1/1/1997	1/1/2007	10	9%	$935.82		7.15
2	12%	1/1/1997	1/1/2007	10	9%	$1,192.53		6.64
3	15%	1/1/1997	1/1/2007	10	9%	$1,385.06		6.38
4	1%	1/1/1997	1/1/2007	10	9%	$486.59		9.31
5	0%	1/1/1997	1/1/2007	10	9%	$422.41		10.00
6	8%	1/1/1997	1/1/2012	15	9%	$919.39		8.99
7	8%	1/1/1997	1/1/2002	5	9%	$961.10		4.30
8	8%	1/1/1997	1/1/2077	80	9%	$889.00		12.11
9	8%	1/1/1997	1/1/2007	10	5%	$1,231.75		7.54
10	8%	1/1/1997	1/1/2007	10	15%	$648.60		6.52
Find the expected percentage change in the prices for the indicated bonds and yield changes
Then Calculate the elasticities.  Interpret the results
Bond	Old Yield			New Yield		Percentage Change		Elasticity
1	9%			11%		-13.11%		-0.590
2	9%			11%		-12.18%		-0.548
6	9%			11%		-16.50%		-0.742
4	9%			11%		-17.09%		-0.769
7	9%			11%		-7.88%		-0.355
Take Bond #6 with the duration of 8.99 years and a maturity of 15 years.Assume a
$100 million face value.
Calculate the terminal value assuming the bond is held for 9 years and
then sold and the interest rate stays at 9%							ANS	$199,682,373
Now Calculate the terminal value assuming the bond is held for 9 years
and then sold and the interest rate drops to 7% immediately after the
bond is purchased.							ANS	$200,590,450
Do the same for a new interest rate of 11%							ANS	$200,620,163