Question

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Find the Macaulay duration of Bond ABC in years by using an excel table. (4 digits after the decimal) Bond ABC 3.00% 2.50% Coupon Yield to maturity Maturity (years) Par Price per par Face value $100.00 $101.8920 1000

Answer 1

1 Duration of Bond = Coupon 1 (1+r)^1 - + 2 X - Coupon 2 (1+r)^2 -X1X - Bond Price + 3 X- Coupon 3 (1+r)^3 - + 4 X - Coupon 4 (1+r)^4 - 3 2 3 . 0.025)^1 + 2X (1+0.025)^2 + 3X (1+0.025)^3 + 4X T -X11 X 101.8921 3 + 2 X + 3 X - - + - X1 X- 101.892 T 4 X - (1.025)^1 (1.025)^2 (101 (1.025)^3 (1.025)^4 = 0.009814 X1X – 3 1.025 — + 2 X - — + 3 X - 1.076890625 + 4 X 1.050625 - 1.103812891 0.009814 x 1 x 2.926829268 + 2x 2.855443189 + 3x 2.785798233 + 4x 2.717851934 = 0.009814 X 2.926829268 + 5.710886377 + 8.357394698 + 10.87140774 = 0.009814 X 27.86651808 = 0.2735