BOND DURATION Dynamic Chart Effective Annual Rate

Duration (Years)
Dynamic Chart of Bond Duration
30
Inputs
25
Rate Convention: 1 = EAR, 0 = APR 1 11
20

Annual Coupon Rate (CR) 5.5% 11

15

Yield to Maturity (Annualized) (y) 9.0% 18

10

Number of Payments / Year (NOP) 1 5 1

0
Outputs 0 5 10 15 20 25 30
Time To Maturity (Years)
Discount Rate / Period (RATE) 9.0%

Dynamic Chart Outputs

Time to Maturity (Years) 1 2 3 4 5 6
Number of Periods to Maturity 1 2 3 4 5 6
Duration of Coupon Bond 1.00 1.95 2.84 3.68 4.46 5.20
Duration of Zero-Coupon Bond 1.00 2.00 3.00 4.00 5.00 6.00

Properties of duration 1 D of zero coupon =maturity

2 Holding maturity constant , Bond D is lower when CR is higher
3 Holding CR constant, bond D increases with maturity
4 Holding other things constant, bond D is higher when YTM is lower
tive Annual Rate

25 30

7 8 9 10 11 12 13 14 15 16
7 8 9 10 11 12 13 14 15 16
5.88 6.51 7.09 7.63 8.13 8.58 8.99 9.37 9.71 10.02
7.00 8.00 9.00 10.00 11.00 12.00 13.00 14.00 15.00 16.00

er when CR is higher
th maturity
higher when YTM is lower
 17 18 19 20 21 22 23 24 25 26
17 18 19 20 21 22 23 24 25 26
10.30 10.55 10.77 10.97 11.15 11.31 11.45 11.58 11.69 11.78
17.00 18.00 19.00 20.00 21.00 22.00 23.00 24.00 25.00 26.00
 27 28 29 30
27 28 29 30
11.87 11.94 12.00 12.06
27.00 28.00 29.00 30.00
Computing Duration- Manual Way
FV 100
YTM 8%
Coupon 8% Annual
n 6

Computing duration
1 2 3
t Cash flow PV of cash flow CF-share Wighted time
1 8 $7.41 0.07 0.0741
2 8 $6.86 0.07 0.1372
3 8 $6.35 0.06 0.1905
4 8 $5.88 0.06 0.2352
5 8 $5.44 0.05 0.2722
6 108 $68.06 0.68 4.0835
$100.00 1.00 4.9927
PV $100.00

Duration 4.9927

Using formula to Compute Duration

4.99271 <-- =DURATION(DATE(20010,1,1),DATE(2016,1,1),C6,C5,1)

Modified Duration 4.62288 <-- =DURATION/(1+YTM)

Using formula 4.62288 <-- =MDURATION(DATE(2006,1,1),DATE(2012,1,1),C6,C5,1)

Effect of YTM on duration

YTM 4.99271 <-- =D28
1% 5.16585
1.50% 5.154045 5.2
2% 5.142149
5.15

5.1

5.05
 5.2

5.15
2.50% 5.130165
3% 5.118092
5.1
3.50% 5.105932
4% 5.093686 5.05
4.50% 5.081353
5% 5.068936 5
5.50% 5.056436
6% 5.043852 4.95
6.50% 5.031187
7% 5.018441 4.9
7.50% 5.005615
4.85
8% 4.99271
8.50% 4.979728
4.8
9% 4.966669 0 0.02 0.04 0.06
9.50% 4.953535
10% 4.940326
10.50% 4.927045

Effect of Maturity on Duration

Start Date 1/1/2006

Maturity 6

End date 1/1/2012

YTM 8%

Coupon 8%

Duration 4.9927100371

years 4.9927100371 <-- =D77

1 1
9
2 1.9259259259
3 2.7832647462 8
4 3.5770969872
5 4.31212684 7
6 4.9927100371
6
7 5.622879664
8 6.2063700592 5

3
 7

5
9 6.7466389437
10 7.2468879109 4
11 7.7100813989 3
12 8.1389642583
13 8.5360780169 2

0
0 2 4 6 8 10
 12
4.9927 $100.00
4%
5% 10
6%
7% 8
8%
9% 6
10%
11% 4

0
4% 5% 6% 7% 8% 9%

0.002

016,1,1),C6,C5,1)

012,1,1),C6,C5,1)
0.04 0.06 0.08 0.1 0.12
8 10 12 14
 12

10

6 4.9927
$100.00
4

0
5% 6% 7% 8% 9% 10% 11%
Period C DF DCF Share DUR T^2+t
1 80 0.925926 74.07407 7.4074% 0.074074 2
2 80 0.857339 68.58711 6.8587% 0.137174 6
3 80 0.793832 63.50658 6.3507% 0.19052 12
4 80 0.73503 58.80239 5.8802% 0.23521 20
5 80 0.680583 54.44666 5.4447% 0.272233 30
6 80 0.63017 50.41357 5.0414% 0.302481 42
7 80 0.58349 46.67923 4.6679% 0.326755 56
8 80 0.540269 43.22151 4.3222% 0.345772 72
9 80 0.500249 40.01992 4.0020% 0.360179 90
10 80 0.463193 37.05548 3.7055% 0.370555 110
11 80 0.428883 34.31063 3.4311% 0.377417 132
12 80 0.397114 31.7691 3.1769% 0.381229 156
13 80 0.367698 29.41583 2.9416% 0.382406 182
14 80 0.340461 27.23688 2.7237% 0.381316 210
15 80 0.315242 25.21934 2.5219% 0.37829 240
16 80 0.29189 23.35124 2.3351% 0.37362 272
17 80 0.270269 21.62152 2.1622% 0.367566 306
18 80 0.250249 20.01992 2.0020% 0.360359 342
19 80 0.231712 18.53697 1.8537% 0.352202 380
20 80 0.214548 17.16386 1.7164% 0.343277 420
21 80 0.198656 15.89246 1.5892% 0.333742 462
22 80 0.183941 14.71524 1.4715% 0.323735 506
23 80 0.170315 13.62522 1.3625% 0.31338 552
24 80 0.157699 12.61595 1.2616% 0.302783 600
25 80 0.146018 11.68143 1.1681% 0.292036 650
26 80 0.135202 10.81614 1.0816% 0.28122 702
27 80 0.125187 10.01495 1.0015% 0.270404 756
28 80 0.115914 9.273098 0.9273% 0.259647 812
29 80 0.107328 8.586202 0.8586% 0.249 870
30 1080 0.099377 107.3275 10.7328% 3.219826 930
1000 1 12.15841

Duration 12.16
Mod.duration 11.26

Change by duration -0.2251556669

Fall 22.51%

Change in price (-D*y+(1/2*convexity*( y)^2)

-0.2251554954
18.27%
DCF*(t^2+t) Y increases 10%
148.14814815 C DF DCF
411.52263374 1 80 0.909091 72.72727
762.07895138 2 80 0.826446 66.1157
1176.0477645 3 80 0.751315 60.10518
1633.3996729 4 80 0.683013 54.64108
2117.3699463 5 80 0.620921 49.67371
2614.0369708 6 80 0.564474 45.15791
3111.9487747 7 80 0.513158 41.05265
3601.7925633 8 80 0.466507 37.32059
4076.1026951 9 80 0.424098 33.92781
4529.0029946 10 80 0.385543 30.84346
4955.9797079 11 80 0.350494 28.03951
5353.6817832 12 80 0.318631 25.49047
5719.7454949 13 80 0.289664 23.17315
6052.6407353 14 80 0.263331 21.0665
6351.5365741 15 80 0.239392 19.15136
6616.1839314 16 80 0.217629 17.41033
6846.8134366 17 80 0.197845 15.82757
7044.0467455 18 80 0.179859 14.3887
7208.8197688 19 80 0.163508 13.08064
7342.3164312 20 80 0.148644 11.89149
7445.9117247 21 80 0.135131 10.81045
7521.1229543 22 80 0.122846 9.827678
7569.5681907 23 80 0.111678 8.934253
7592.9310555 24 80 0.101526 8.122048
7592.9310555 25 80 0.092296 7.38368
7571.2987733 26 80 0.083905 6.712436
7529.7552958 27 80 0.076278 6.102215
7469.9953331 28 80 0.069343 5.547468
99814.592813 29 80 0.063039 5.043153
247781.32292 30 1080 0.057309 61.89324
Price 811.4617
Decline 0.188538
Convexity 0.000857 18.85%
Convexity 212.4325
At 6%YTM
Period C DF DCF Share DUR
1 9 0.943396 8.490566 6.3169% 0.0631692654
2 9 0.889996 8.009968 5.9594% 0.1191872933
3 9 0.839619 7.556574 5.6220% 0.1686612641
4 9 0.792094 7.128843 5.3038% 0.2121525334
5 9 0.747258 6.725324 5.0036% 0.2501798743
6 9 0.704961 6.344645 4.7204% 0.2832224992
7 9 0.665057 5.985514 4.4532% 0.3117228765
8 9 0.627412 5.646711 4.2011% 0.3360893547
9 9 0.591898 5.327086 3.9633% 0.3566986076
10 9 0.558395 5.025553 3.7390% 0.3738979115
11 9 0.526788 4.741088 3.5273% 0.3880072667
12 9 0.496969 4.472724 3.3277% 0.3993213722
13 9 0.468839 4.219551 3.1393% 0.4081114653
14 9 0.442301 3.980709 2.9616% 0.414627033
15 9 0.417265 3.755386 2.7940% 0.4190974053
16 9 0.393646 3.542817 2.6358% 0.4217332381
17 9 0.371364 3.34228 2.4866% 0.4227278919
18 9 0.350344 3.153094 2.3459% 0.4222587156
19 9 0.330513 2.974617 2.2131% 0.4204882388
20 109 0.311805 33.98672 25.2859% 5.0571795242
134.4098 1 11.2485336314 0.002

10.6118241805

Change in y= 20 basispoints=.2%=.002

V0 134.40
V- 137.30
V+ 131.84

137.30-131.84/(2*134.40)*(.002)
5.46
10.15625
 At 5.8%YTM At 6.2%YTM
Period C DF DCF Share DUR Period
1 9 0.94518 8.5066162571 6.3289% 0.063289 1
2 9 0.893364 8.0402800162 5.9819% 0.119638 2
3 9 0.84439 7.5995085219 5.6540% 0.16962 3
4 9 0.7981 7.1829003042 5.3440% 0.213761 4
5 9 0.754348 6.7891307223 5.0511% 0.252553 5
6 9 0.712994 6.4169477527 4.7742% 0.28645 6
7 9 0.673908 6.0651680082 4.5124% 0.315871 7
8 9 0.636964 5.7326729756 4.2651% 0.341206 8
9 9 0.602045 5.418405459 4.0313% 0.362813 9
10 9 0.569041 5.1213662183 3.8103% 0.381026 10
11 9 0.537846 4.8406107924 3.6014% 0.396152 11
12 9 0.508361 4.5752464956 3.4040% 0.408474 12
13 9 0.480492 4.32442958 3.2173% 0.418255 13
14 9 0.454151 4.087362552 3.0410% 0.425736 14
15 9 0.429255 3.863291637 2.8743% 0.43114 15
16 9 0.405723 3.6515043828 2.7167% 0.434671 16
17 9 0.383481 3.451327394 2.5678% 0.43652 17
18 9 0.362458 3.2621241909 2.4270% 0.43686 18
19 9 0.342588 3.0832931861 2.2940% 0.435851 19
20 109 0.323807 35.2949965644 26.2593% 5.25185 20
137.307183011 1.021557 11.58174

10.94682

ints=.2%=.002

1.84/(2*134.40)*(.002)
At 6.2%YTM
C DF DCF Share DUR
9 0.94162 8.474576 6.3050% 0.06305
9 0.886647 7.979827 5.9369% 0.118739
9 0.834885 7.513961 5.5903% 0.16771
9 0.786144 7.075293 5.2640% 0.210559
9 0.740248 6.662235 4.9567% 0.247833
9 0.697032 6.273291 4.6673% 0.280037
9 0.656339 5.907053 4.3948% 0.307637
9 0.618022 5.562197 4.1382% 0.331059
9 0.581942 5.237474 3.8966% 0.350698
9 0.547968 4.931708 3.6692% 0.366916
9 0.515977 4.643793 3.4550% 0.380045
9 0.485854 4.372686 3.2533% 0.39039
9 0.45749 4.117407 3.0633% 0.398232
9 0.430781 3.877031 2.8845% 0.403828
9 0.405632 3.650688 2.7161% 0.407413
9 0.381951 3.43756 2.5575% 0.409204
9 0.359653 3.236873 2.4082% 0.409396
9 0.338656 3.047903 2.2676% 0.408172
9 0.318885 2.869966 2.1352% 0.405695
109 0.300268 32.72926 24.3504% 4.870072
131.6008 0.979101 10.92668

10.28878
SDATE NCD C Years DF DCF Share DUR

29-Oct-10
15-Jul-10
t-Days360 t-year frac
15-Jan-11 4.035 0.42 0.987092 3.982914 3.57% 0.015073 0.42
15-Jul-11 4.035 1.42 0.95718 3.86222 3.46% 0.049234 1.42
15-Jan-12 4.035 2.42 0.928174 3.745183 3.36% 0.081311 2.42
15-Jul-12 4.035 3.42 0.900048 3.631693 3.26% 0.111399 3.42
15-Jan-13 4.035 4.42 0.872774 3.521641 3.16% 0.139589 4.42
15-Jul-13 4.035 5.42 0.846326 3.414925 3.06% 0.165967 5.42
15-Jan-14 4.035 6.42 0.82068 3.311442 2.97% 0.190619 6.42
15-Jul-14 4.035 7.42 0.795811 3.211096 2.88% 0.213625 7.42
15-Jan-15 4.035 8.42 0.771695 3.11379 2.79% 0.235061 8.42
15-Jul-15 4.035 9.42 0.74831 3.019432 2.71% 0.255002 9.42
15-Jan-16 4.035 10.42 0.725634 2.927935 2.62% 0.273518 10.42
15-Jul-16 4.035 11.42 0.703645 2.839209 2.54% 0.290678 11.42
15-Jan-17 104.035 12.42 0.682323 70.98546 63.63% 7.903749 12.42
DP 111.5669 1 9.924827
AI 2.331333 DUR 4.96
CP 109.2356 MODUR 4.81

% Price Change due to 200bps increase in yield

% Price Change due to 200bps fall in yield

29-Oct-10 15-Jan-11 4.035 0.42 0.991161 3.999335

15-Jul-11 4.035 1.42 0.970537 3.916117
15-Jan-12 4.035 2.42 0.950342 3.834632
15-Jul-12 4.035 3.42 0.930568 3.754841
15-Jan-13 4.035 4.42 0.911205 3.676711
15-Jul-13 4.035 5.42 0.892245 3.600207
15-Jan-14 4.035 6.42 0.873679 3.525294
15-Jul-14 4.035 7.42 0.855499 3.45194
15-Jan-15 4.035 8.42 0.837698 3.380113
15-Jul-15 4.035 9.42 0.820268 3.30978
15-Jan-16 4.035 10.42 0.8032 3.240911
15-Jul-16 4.035 11.42 0.786487 3.173474
15-Jan-17 104.035 12.42 0.770122 80.11962
DP 122.983 11.41604 10.23246 For 200bps fall

29-Oct-10 15-Jan-11 4.035 0.42 0.983078 3.966719

15-Jul-11 4.035 1.42 0.944132 3.809574
15-Jan-12 4.035 2.42 0.90673 3.658654
 15-Jul-12 4.035 3.42 0.870809 3.513714
15-Jan-13 4.035 4.42 0.836311 3.374515
15-Jul-13 4.035 5.42 0.80318 3.240831
15-Jan-14 4.035 6.42 0.771361 3.112442
15-Jul-14 4.035 7.42 0.740803 2.98914
15-Jan-15 4.035 8.42 0.711456 2.870723
15-Jul-15 4.035 9.42 0.683271 2.756997
15-Jan-16 4.035 10.42 0.656202 2.647776
15-Jul-16 4.035 11.42 0.630206 2.542882
15-Jan-17 104.035 12.42 0.60524 62.96616
DP 101.4501 10.11681 9.06793 For 200bps rise
 Coupon 8.07% 0.00
v0 111.5669 YTM 6.25% 0.03125
V+ 108.9227
(t^2)+t CON
V- 114.2923 5.3696 0.600494 2.391716 (V+)+(V-)-(
1.115669 3.444938 13.30511 v0(changeY
MODDUR 4.812853 Mod.Durat 4.812853 8.289383 31.04526 Convexity
DUR 4.963254 15.133827 54.96141
23.978272 84.44287
34.822716 118.917
Price 109.2356 47.667160 157.8471
Duration 4.962413 62.511605 200.7307
Mod.Durat 4.812037 79.356049 247.0981
98.200494 296.5098
119.044938 348.5558
141.889383 402.8536
0.005 166.733827 11835.68
Sum 13794.33
P*(1+y^2) 118.6488
No. of day 104 Semi-annual Conv 116.2619
Acc.int 2.331333 Annual Convexity 29.06547
-9.0428%
10.21%
 6.25
0.2

0.081077
0.002789
29.06845