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Period Cash Flow PV Cash Flow Duration Calc Convexity Calc

This document provides information on bond pricing including the face value, coupon rate, yield, duration, modified duration, and convexity of a $1,000 6-year bond with an 8% coupon rate. It shows the bond price would fall 45.59% if yields rise by 1%, close to the modified duration prediction of -46.93%. The small difference of 0.14% incorporates the convexity adjustment. Duration and convexity capture how price is affected by changes in yield, important for measuring interest rate risk.

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Jai Deep
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38 views4 pages

Period Cash Flow PV Cash Flow Duration Calc Convexity Calc

This document provides information on bond pricing including the face value, coupon rate, yield, duration, modified duration, and convexity of a $1,000 6-year bond with an 8% coupon rate. It shows the bond price would fall 45.59% if yields rise by 1%, close to the modified duration prediction of -46.93%. The small difference of 0.14% incorporates the convexity adjustment. Duration and convexity capture how price is affected by changes in yield, important for measuring interest rate risk.

Uploaded by

Jai Deep
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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Bond Price

Face Value
Coupon Rate
Life in Years
Yield
Frequency
Macaulay Duration
Modified Duration
Convexity
Period
0
1
2
3
4
5
6
7
8
9
10
11
12

$1,000.00
1,000
8.00%
6
8.00%
2

$954.41
1000
8%
6
9%
2

4.88
4.69
27.23
Cash Flow
($1,000.00)
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
1,040.00

If Yield Changes By
Bond Price Will Change By

1.00%
-45.59

Modified Duration Predicts


Convexity Adjustment
Total Predicted Change

-46.93
1.36
-45.56

Actual New Price


Predicted New Price
Difference
PV Cash Flow
38.46
36.98
35.56
34.19
32.88
31.61
30.40
29.23
28.10
27.02
25.98
649.58

Duration Calc
38.46
73.96
106.68
136.77
164.39
189.68
212.78
233.82
252.93
270.23
285.82
7,794.97

$954.41
$954.44
$0.03
Convexity Calc
71.12
205.15
394.53
632.25
911.90
1,227.56
1,573.79
1,945.62
2,338.49
2,748.23
3,171.03
93,689.56

Total

9,760.48

108,909.24

-4.56%
-4.69%
0.14%
-4.56%

D Mac=

C=

(
t =1

1
( 1+i )2

CF t

1+i )
VB

t =1

CF t

( 1+ i )
VB

2
(
t
+t )
t

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