B

BOND PRICING
Par/Face Value
Coupon % =
Maturity/Term =

$ 1,000.00
8.00%
20 yrs

Present Value of Coupon Pmts=

Present Value of Principal Pmt=
Total
Net Present Value

Semi-Annual Coupon =
Semi-Annual Payment =
Semi-Annual # Paymants =

$791.71 =PV(B4/2,G5,-G4)
$208.29 =PV(B4/2,G5,0,-B3,0)
$1,000.00
$1,000.00
$0.00
=NPV($B$4/2,C16:C75)

$1,000.00

Long-Form
Period
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
IRR =

4.00%
$ 40.00 every 6 mnts
40 pmts

Coupon
Payment
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
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

Principal
Payment
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

Total Payment
$
(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
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
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
4.00%

YIELD TO MATURITY
Settlement Date=
Maturity Date=
Coupon Rate=
Bond Pricing=
Redemption Value=
Coupon pmts per yr=

1/1/2000
1/1/2010
8.000%
110
100
2

Yield to Maturity=

6.617% =YIELD(D84,D85,D86,D87,D88,D89)
Long-Form
Period
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
IRR =

Coupon
Payment

Principal
Payment

$
$
$
$
$

40.00
40.00
40.00
40.00
40.00

$
$
$
$
$

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

40.00 $
40.00 $
40.00 $
40.00 $
40.00 $
40.00 $
40.00 $
40.00 $
40.00 $
40.00 $
40.00 $
40.00 $
40.00 $
40.00 $
40.00 $ 1,000.00

Total Payment
$
(1,100.00)
$
40.00
$
40.00
$
40.00
$
40.00
$
40.00
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

40.00
40.00
40.00
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
3.3085%

6.617%

DURATION AND CONVEXITY FORMULAS

3
4
5
6
7
8
9
10
11
12
13
14

VALUING BONDS

15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31

Settlement Date=
Maturity Date=
Coupon Rate=
Yield to Maturity=
Redemption value %=
Coupon Pmts per year=

1/15/2007
1/15/2011
4.250%
4.740%
100
2

Flat Price (% Par)

Day since last coupon=
Days in coupon period=
Accrued Interest=

98.234
0
181
0

Invoice Price=

98.234 =+M11+M14

Settlement Date=
Maturity Date=
Coupon Rate=
Yield to Maturity=
Redemption value %=
Coupon Pmts per year=

2/15/2007
1/15/2011
4.250%
4.740%
100
2

Flat Price (% Par)

Day since last coupon=
Days in coupon period=
Accrued Interest=
Invoice Price=

98.264
31
181
0.363950276
98.628

=PRICE(M4,M5,M6,M7,M8,M9)
=COUPDAYBS(M4,M5,2,1)
=COUPDAYS(M4,M5,2,1)
=(M12/M13)*M6*100/2

62

63
64
65
66
67
68
69
70
71
72
73
74

YIELD TO CALL Vs YIELD TO MATURITY

75
76
77
78

YIELD =

81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97

Settlement Date=
Maturity Date / Call Date=
Coupon Rate=
Coupon Pmt =
Number of semiannual
Call Provision
Final Payment
Price

YTC
1/1/2000
1/1/2010
8.00%
40.00
20 periods
110.00
110.00
115.00

6.6434%

YTM
1/1/2000
1/1/2030
8.00%
40.00
60 periods
100.00
100.00
115.00

6.8192%

=YIELD(M85,M86,M87,M92/10,M91/10,2)

SIMPLE DURATION
Int.Rate =

10%

8% coupon bond

Duration
Zero Bond will be 3 years

Time until
Payments
1
2
3

Payment

PV of Pmt
DR = 10%
80
72.727
80
66.116
1080
811.420
950.263

Px0
%
Duration
Weight
7.65%
0.0765
6.96%
0.1392
85.39%
2.5617
100.00%
2.7774

100
101

MACAULAY DURATION AND CONVEXITY

102 Sensitivity to interest rate movements

IRR=

10.0000%

=-PV(M108/M109,M107*M109,M106*M105/M109,M105)

103
104 Bond Price

$875.38
1,000
8.00%
10
10.00%
2

105 Face Value

106 Coupon Rate
107 Life in Years
108 Yield
109 Frequency

If Yield Changes By
Bond Price Will Change By

1.00%
-54.63

-6.24% =+R105/M104

=-(M104+PV((M108+R104)/M109,M107*M109,M106*M105

Modified Duration Predicts

Convexity Adjustment
Total Predicted Change

-57.03 =(-M112*R104*M104)
2.47 =0.5*M113*R104^2*M104
-54.56 =+R107+R108

110
111 Macaulay Duration
112 Modified Duration
113 Convexity

6.84 =+P137/M104/M109
6.51 =+M111/(1+M108/M109)
56.49 =+S137/M104/M109^M109

Actual New Price

Predicted New Price
Difference

$820.74 =-PV((M108+Q104)/M109,M107*M109,M106*M105/M109,M
$820.82 =+M104+R109
$0.08 =+R112-R111

114

137

Cash Flow
($875.38)
40.00
40.00
40.00
40.00
40.00
40.00
40.00
40.00
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
Total

138

PRICE

115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136

Period
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

PV Cash
Flow
38.10
36.28
34.55
32.91
31.34
29.85
28.43
27.07
25.78
24.56
23.39
22.27
21.21
20.20
19.24
18.32
17.45
16.62
15.83
391.97
875.38

Weighted
4.352%
4.145%

Duration
Calc
Method 1
0.04352
0.08289

3.947%

0.11842

3.759%
3.580%

0.15037
0.17901

3.410%
3.247%

0.20459
0.22732

3.093%
2.946%

0.24742
0.26510

2.805%
2.672%

0.28052
0.29388

2.544%
2.423%

0.30533
0.31503

2.308%
2.198%

0.32310
0.32970

2.093%
1.994%
1.899%

0.33493
0.33892
0.34177

1.808%

0.34357

44.777%

8.95533

100%

13.68074

DURATION

6.84037

Duration Calc
Method 2
PV of pv(CF) Factor years
38.10
72.56
103.66
131.63
156.71
179.09
198.99
216.59
232.06
245.57
257.26
267.28
275.77
282.84
288.61
293.19
296.68
299.17
300.76
7,839.30
11,975.81

34.554
32.908

2.000
6.000

31.341

12.000

29.849
28.427

20.000
30.000

27.074
25.784

42.000
56.000

24.557
23.387

72.000
90.000

22.273
21.213

110.000
132.000

20.203
19.241

156.000
182.000

18.324
17.452

210.000
240.000

16.621
15.829
15.076

272.000
306.000
342.000

14.358

380.000

355.524

420.000

793.99356
CONVEXITY

Convexity
Calc
69.11
197.45
376.09
596.97
852.82
1,137.09
1,443.92
1,768.07
2,104.85
2,450.08
2,800.10
3,151.62
3,501.80
3,848.14
4,188.45
4,520.86
4,843.78
5,155.85
5,455.92
149,320.02
197,783.01
56.49

08+R104)/M109,M107*M109,M106*M105/M109,M105))

04)/M109,M107*M109,M106*M105/M109,M105)