Find the Modified duration of Bond ABC in years by using an excel table. (4 digits...

Find the Modified duration of Bond ABC in years by using an excel table. (4 digits after the decimal)

	Bond ABC
Coupon	8%
Yield to maturity	9%
Maturity (years)	5
Par	$100.00
Price	$96.0436

Expert Solution


Period	Cash Flow	Discounting factor	PV Cash Flow	Duration Calc
0	($96.04)	=(1+YTM/number of coupon payments in the year)^period	=cashflow/discounting factor	=PV cashflow*period
1	8.00	1.09	7.34	7.34
2	8.00	1.19	6.73	13.47
3	8.00	1.30	6.18	18.53
4	8.00	1.41	5.67	22.67
5	108.00	1.54	70.19	350.96
			Total	412.97

Macaulay duration =(∑ Duration calc)/(bond price*number of coupon per year)

=412.97/(96.0436*1)

=4.2998

Modified duration = Macaulay duration/(1+YTM)

=4.3/(1+0.09)

=3.9448

jeff jeffy answered 1 year ago

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