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    Book 1

    Uploaded by

    Naman Kapoor
    The document discusses bond valuation and sensitivity analysis. It provides the cash flows and yield to maturity calculations for a bond with a face value of Rs. 100, coupon rate of 7%, and maturity of 5 years. It then shows how the bond value changes as the yield to maturity changes from 1% to 25%. It also defines and calculates the Macaulay duration and modified duration of the bond to analyze how its price will change in response to changes in interest rates.

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    Book 1

    Uploaded by

    Naman Kapoor
    15 views3 pages
    The document discusses bond valuation and sensitivity analysis. It provides the cash flows and yield to maturity calculations for a bond with a face value of Rs. 100, coupon rate of 7%, and maturity of 5 years. It then shows how the bond value changes as the yield to maturity changes from 1% to 25%. It also defines and calculates the Macaulay duration and modified duration of the bond to analyze how its price will change in response to changes in interest rates.

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    Book1

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    The document discusses bond valuation and sensitivity analysis. It provides the cash flows and yield to maturity calculations for a bond with a face value of Rs. 100, coupon rate of 7%, and maturity of 5 years. It then shows how the bond value changes as the yield to maturity changes from 1% to 25%. It also defines and calculates the Macaulay duration and modified duration of the bond to analyze how its price will change in response to changes in interest rates.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    15 views3 pages

    Book 1

    Uploaded by

    Naman Kapoor
    The document discusses bond valuation and sensitivity analysis. It provides the cash flows and yield to maturity calculations for a bond with a face value of Rs. 100, coupon rate of 7%, and maturity of 5 years. It then shows how the bond value changes as the yield to maturity changes from 1% to 25%. It also defines and calculates the Macaulay duration and modified duration of the bond to analyze how its price will change in response to changes in interest rates.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 3

    face value 100 year cf

    coupon 7% 1 7
    coupon 7 2 7
    tenure 5 3 7
    4 7
    5 107
    Pv of bond=pv of bond at discounting factor at required rate of return
    required rate of return = yield to maturity 8%

    value of bond today = ₹ 96.01 =NPV(G9,E3:E7)


    ₹ -96.01 =PV(G9,5,7,100,)

    YTM VALUE
    1% ₹ 129.12
    2% ₹ 123.57
    3% ₹ 118.32
    4% ₹ 113.36
    5% ₹ 108.66
    6% ₹ 104.21
    7% ₹ 100.00
    8% ₹ 96.01
    9% ₹ 92.22
    10% ₹ 88.63
    11% ₹ 85.22
    12% ₹ 81.98
    13% ₹ 78.90
    14% ₹ 75.97
    15% ₹ 73.18
    16% ₹ 70.53
    17% ₹ 68.01
    18% ₹ 65.60
    19% ₹ 63.31
    20% ₹ 61.12
    21% ₹ 59.04
    22% ₹ 57.05
    23% ₹ 55.14
    24% ₹ 53.33
    25% ₹ 51.59
    sensitivity of bond value

    FACE 100
    COUPON 8%
    80
    TENURE 3
    YTM 10%
    ₹ 1,010.37

    METHOD -1 FOR CALCULATING YTM / MODOFIED DURATION

    YEAR(T) CF PV PV*T
    1 80 ₹ 72.73 ₹ 72.73
    2 80 ₹ 66.12 ₹ 132.23
    3 1080 ₹ 811.42 ###
    ₹ 950.26 ###

    MACAULAY DURATION - - WEIGHTED AVERAGE TIME PERIODS OF B

    MODIFIED DURATION MAC(D)/(1+YTM)


    2.52 TIMES
    INTER

    SHORT CUT METHOD


    YTM 10% 9.99% 10.01%
    PRICE ₹ 950.26 ₹ 950.50 ₹ 950.02

    MD= PH-PL ₹ 0.48 2.52


    2*P0*0.01% ₹ 0.19
    YTM= MODIFIED DURATION

    IF MD=5 THIS MEANS THE YTM CHANGES BY 1%, BOND VALUE CHANGES BY 5%

    D AVERAGE TIME PERIODS OF BONDS


    SUM(W*X)/SUM(W)
    SUM(PV*t)/SUM(PV)
    2.78 TIMES

    FOR 1% CHANGE IN YTM THERE WILL BE 2.52 % CHANGE IN B.V

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