Copyright

Walt Disney Company's Slepping Beauty Bonds-Duration Analysis-courseware

Harvard Business School Case 294-038
Courseware 9-208-725

This courseware was prepared by Professor Carliss Y. Baldwin solely for students as the basis
for class discussion. Cases are not intended to serve as endorsements, sources of primary
data, or illustrations of effective or ineffective management. Copyright © 2008 President and
Fellows of Harvard College. No part of this product may be reproduced, stored in a retrieval
system, used in a spreadsheet or transmitted in any form or by any means—electronic,
mechanical, photocopying, recording or otherwise—without the permission of Harvard
Business School.

1
 431936074.xls

Sleeping Beauty Basic Spreadsheet

Calendar Relative Cash Flow Present Present Value
Year Year per $100 Value Each Cash Flow

1993 0 75.50
1994 1 7.55
1995 2 7.55
1996 3 7.55
1997 4 7.55
1998 5 7.55
1999 6 7.55
2000 7 7.55
2001 8 7.55
2002 9 7.55
2003 10 7.55
2004 11 7.55
2005 12 7.55
2006 13 7.55
2007 14 7.55
2008 15 7.55
2009 16 7.55
2010 17 7.55
2011 18 7.55
2012 19 7.55
2013 20 7.55
2014 21 7.55
2015 22 7.55
2016 23 7.55
2017 24 7.55
2018 25 7.55
2019 26 7.55
2020 27 7.55
2021 28 7.55
2022 29 7.55
2023 30 7.55

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 431936074.xls

Sleeping Beauty Present Value as a Function of the Interest Rate

Calendar Relative Cash Flow Interest Present
Year Year per $100 Rates Values

1993 0 2% $339.20
1994 1 7.55 3% $243.54
1995 2 7.55 4% $186.85
1996 3 7.55 5% $150.55
1997 4 7.55 6% $125.74
1998 5 7.55 7% $107.84
1999 6 7.55 8% $94.38
2000 7 7.55 9% $83.89
2001 8 7.55 10% $75.50
2002 9 7.55 11% $68.64
2003 10 7.55 12% $62.92
2004 11 7.55 13% $58.08
2005 12 7.55 14% $53.93
2006 13 7.55 15% $50.33
2007 14 7.55 16% $47.19
2008 15 7.55 17% $44.41
2009 16 7.55 18% $41.94
2010 17 7.55 19% $39.74
2011 18 7.55 20% $37.75
2012 19 7.55 100% $7.55
2013 20 7.55 500% $1.51
2014 21 7.55 1000% $0.76
2015 22 7.55
2016 23 7.55
2017 24 7.55
2018 25 7.55
2019 26 7.55
2020 27 7.55

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 431936074.xls

the Interest Rate

Present Value at
8.55%

$88.31

Present Value at
6.55%
$115.24

Page 4
 431936074.xls

Sleeping Beauty Bonds of Different Maturity

Cash Flow per $100
Calendar Relative Sleeping Napping Interest
Year Year Beauties Beauties Rates

1993 0 2%
1994 1 7.55 7.55 3%
1995 2 7.55 7.55 4%
1996 3 7.55 7.55 5%
1997 4 7.55 7.55 6%
1998 5 7.55 7.55 7%
1999 6 7.55 7.55 7.55%
2000 7 7.55 7.55 8%
2001 8 7.55 7.55 9%
2002 9 7.55 7.55 10%
2003 10 7.55 107.55 11%
2004 11 7.55 12%
2005 12 7.55 13%
2006 13 7.55 14%
2007 14 7.55 15%
2008 15 7.55 16%
2009 16 7.55 17%
2010 17 7.55 18%
2011 18 7.55 19%
2012 19 7.55 20%
2013 20 7.55
2014 21 7.55
2015 22 7.55
2016 23 7.55
2017 24 7.55
2018 25 7.55
2019 26 7.55
2020 27 7.55
2021 28 7.55
2022 29 7.55
2023 30 7.55
2024 31 7.55
2025 32 7.55
2026 33 7.55
2027 34 7.55
2028 35 7.55
2029 36 7.55
2030 37 7.55
2031 38 7.55
2032 39 7.55

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 431936074.xls

Present Value
Sleeping Napping
Beauties Beauties

$339.20 $149.85
$243.78 $138.81
$186.99 $128.79
$150.61 $119.69
$125.76 $111.41
$107.85 $103.86
$100.00 $100.00
$94.38 $96.98
$83.89 $90.69
$75.50 $84.95
$68.64 $79.68
$62.92 $74.86
$58.08 $70.43
$53.93 $66.36
$50.33 $62.61
$47.19 $59.16
$44.41 $55.98
$41.94 $53.04
$39.74 $50.32
$37.75 $47.80

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 431936074.xls

Present Value of a 100-year and a 10-year

Bond as a Function of the Interest Rate
Present Value

$200.00

100-year bonds
$150.00

$100.00
10-year bonds

$50.00

$0.00
2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
Interest Rate

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 431936074.xls

Sleeping Beauty Calculation of Duration

Calendar Relative
Year Year Sleeping Beauties 10-Year Bond 30-Year Bond

Interest 7.55% 7.55% 7.55%

Rate
Duration
(in Years)

1993 0
1994 1 7.02 7.02 7.02
1995 2 6.53 6.53 6.53
1996 3 6.07 6.07 6.07
1997 4 5.64 5.64 5.64
1998 5 5.25 5.25 5.25
1999 6 4.88 4.88 4.88
2000 7 4.54 4.54 4.54
2001 8 4.22 4.22 4.22
2002 9 3.92 3.92 3.92
2003 10 3.65 51.94 519.41 3.65
2004 11 3.39 3.39
2005 12 3.15 3.15
2006 13 2.93 2.93
2007 14 2.73 2.73
2008 15 2.53 2.53
2009 16 2.36 2.36
2010 17 2.19 2.19
2011 18 2.04 2.04
2012 19 1.89 1.89
2013 20 1.76 1.76
2014 21 1.64 1.64
2015 22 1.52 1.52
2016 23 1.42 1.42
2017 24 1.32 1.32
2018 25 1.22 1.22
2019 26 1.14 1.14
2020 27 1.06 1.06
2021 28 0.98 0.98
2022 29 0.91 0.91
2023 30 0.85 12.11
2024 31 0.79
2025 32 0.74
2026 33 0.68
2027 34 0.64
2028 35 0.59
2029 36 0.55
2030 37 0.51
2031 38 0.48
2032 39 0.44

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2033 40 0.41
2034 41 0.38
2035 42 0.36
2036 43 0.33
2037 44 0.31
2038 45 0.29
2039 46 0.27
2040 47 0.25
2041 48 0.23
2042 49 0.21
2043 50 0.20
2044 51 0.18
2045 52 0.17
2046 53 0.16
2047 54 0.15
2048 55 0.14
2049 56 0.13
2050 57 0.12
2051 58 0.11
2052 59 0.10
2053 60 0.10
2054 61 0.09
2055 62 0.08
2056 63 0.08
2057 64 0.07
2058 65 0.07
2059 66 0.06
2060 67 0.06
2061 68 0.05
2062 69 0.05
2063 70 0.05
2064 71 0.04
2065 72 0.04
2066 73 0.04
2067 74 0.03
2068 75 0.03
2069 76 0.03
2070 77 0.03
2071 78 0.03
2072 79 0.02
2073 80 0.02
2074 81 0.02
2075 82 0.02
2076 83 0.02
2077 84 0.02
2078 85 0.02
2079 86 0.01
2080 87 0.01
2081 88 0.01
2082 89 0.01

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 431936074.xls

2083 90 0.01
2084 91 0.01
2085 92 0.01
2086 93 0.01
2087 94 0.01
2088 95 0.01
2089 96 0.01
2090 97 0.01
2091 98 0.01
2092 99 0.01
2093 100 0.07

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 431936074.xls

30-Year Zero

7.55%

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
100

Page 11
431936074.xls

Page 12
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Page 13
 431936074.xls

Sleeping Beauty Sensitivity Up

Calendar Relative Sleeping 10-Year 30-Year 30-Year
Year Year Beauty Bond Bond Zero

Interest 7.55% 7.55% 7.55% 7.55%

Rate

Value 100.00 100.00 100.00 100.00

% Ch. In Value

1993 0
1994 1 7.02 7.02 7.02 0
1995 2 6.53 6.53 6.53 0
1996 3 6.07 6.07 6.07 0
1997 4 5.64 5.64 5.64 0
1998 5 5.25 5.25 5.25 0
1999 6 4.88 4.88 4.88 0
2000 7 4.54 4.54 4.54 0
2001 8 4.22 4.22 4.22 0
2002 9 3.92 3.92 3.92 0
2003 10 3.65 51.94 3.65 0
2004 11 3.39 3.39 0
2005 12 3.15 3.15 0
2006 13 2.93 2.93 0
2007 14 2.73 2.73 0
2008 15 2.53 2.53 0
2009 16 2.36 2.36 0
2010 17 2.19 2.19 0
2011 18 2.04 2.04 0
2012 19 1.89 1.89 0
2013 20 1.76 1.76 0
2014 21 1.64 1.64 0
2015 22 1.52 1.52 0
2016 23 1.42 1.42 0
2017 24 1.32 1.32 0
2018 25 1.22 1.22 0
2019 26 1.14 1.14 0
2020 27 1.06 1.06 0
2021 28 0.98 0.98 0
2022 29 0.91 0.91 0
2023 30 0.85 12.11 100
2024 31 0.79
2025 32 0.74
2026 33 0.68
2027 34 0.64
2028 35 0.59
2029 36 0.55
2030 37 0.51
2031 38 0.48

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2032 39 0.44
2033 40 0.41
2034 41 0.38
2035 42 0.36
2036 43 0.33
2037 44 0.31
2038 45 0.29
2039 46 0.27
2040 47 0.25
2041 48 0.23
2042 49 0.21
2043 50 0.20
2044 51 0.18
2045 52 0.17
2046 53 0.16
2047 54 0.15
2048 55 0.14
2049 56 0.13
2050 57 0.12
2051 58 0.11
2052 59 0.10
2053 60 0.10
2054 61 0.09
2055 62 0.08
2056 63 0.08
2057 64 0.07
2058 65 0.07
2059 66 0.06
2060 67 0.06
2061 68 0.05
2062 69 0.05
2063 70 0.05
2064 71 0.04
2065 72 0.04
2066 73 0.04
2067 74 0.03
2068 75 0.03
2069 76 0.03
2070 77 0.03
2071 78 0.03
2072 79 0.02
2073 80 0.02
2074 81 0.02
2075 82 0.02
2076 83 0.02
2077 84 0.02
2078 85 0.02
2079 86 0.01
2080 87 0.01
2081 88 0.01

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 431936074.xls

2082 89 0.01
2083 90 0.01
2084 91 0.01
2085 92 0.01
2086 93 0.01
2087 94 0.01
2088 95 0.01
2089 96 0.01
2090 97 0.01
2091 98 0.01
2092 99 0.01
2093 100 0.07

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 431936074.xls

Sleeping Beauty Sensitivity Down

Calendar Relative Sleeping 10-Year 30-Year 30-Year
Year Year Beauty Bond Bond Zero

Interest 7.55% 7.55% 7.55% 7.55%

Rate

Value 100.00 100.00 100.00 100.00

% Ch. In Value

1993 0
1994 1 7.02 7.02 7.02 0
1995 2 6.53 6.53 6.53 0
1996 3 6.07 6.07 6.07 0
1997 4 5.64 5.64 5.64 0
1998 5 5.25 5.25 5.25 0
1999 6 4.88 4.88 4.88 0
2000 7 4.54 4.54 4.54 0
2001 8 4.22 4.22 4.22 0
2002 9 3.92 3.92 3.92 0
2003 10 3.65 51.94 3.65 0
2004 11 3.39 3.39 0
2005 12 3.15 3.15 0
2006 13 2.93 2.93 0
2007 14 2.73 2.73 0
2008 15 2.53 2.53 0
2009 16 2.36 2.36 0
2010 17 2.19 2.19 0
2011 18 2.04 2.04 0
2012 19 1.89 1.89 0
2013 20 1.76 1.76 0
2014 21 1.64 1.64 0
2015 22 1.52 1.52 0
2016 23 1.42 1.42 0
2017 24 1.32 1.32 0
2018 25 1.22 1.22 0
2019 26 1.14 1.14 0
2020 27 1.06 1.06 0
2021 28 0.98 0.98 0
2022 29 0.91 0.91 0
2023 30 0.85 12.11 100
2024 31 0.79
2025 32 0.74
2026 33 0.68
2027 34 0.64
2028 35 0.59
2029 36 0.55
2030 37 0.51
2031 38 0.48

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2032 39 0.44
2033 40 0.41
2034 41 0.38
2035 42 0.36
2036 43 0.33
2037 44 0.31
2038 45 0.29
2039 46 0.27
2040 47 0.25
2041 48 0.23
2042 49 0.21
2043 50 0.20
2044 51 0.18
2045 52 0.17
2046 53 0.16
2047 54 0.15
2048 55 0.14
2049 56 0.13
2050 57 0.12
2051 58 0.11
2052 59 0.10
2053 60 0.10
2054 61 0.09
2055 62 0.08
2056 63 0.08
2057 64 0.07
2058 65 0.07
2059 66 0.06
2060 67 0.06
2061 68 0.05
2062 69 0.05
2063 70 0.05
2064 71 0.04
2065 72 0.04
2066 73 0.04
2067 74 0.03
2068 75 0.03
2069 76 0.03
2070 77 0.03
2071 78 0.03
2072 79 0.02
2073 80 0.02
2074 81 0.02
2075 82 0.02
2076 83 0.02
2077 84 0.02
2078 85 0.02
2079 86 0.01
2080 87 0.01
2081 88 0.01

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 431936074.xls

2082 89 0.01
2083 90 0.01
2084 91 0.01
2085 92 0.01
2086 93 0.01
2087 94 0.01
2088 95 0.01
2089 96 0.01
2090 97 0.01
2091 98 0.01
2092 99 0.01
2093 100 0.07

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 431936074.xls

Sleeping Beauty The Relation between Duration and Interest Rate Sen
Sleeping 10-Year 30-Year 30-Year
Beauty Bond Bond Zero

% Ch if Rate Down 1% 0.0% 0.0% 0.0% 0.0%

Duration 0.00 0.00 0.00 0.00

% Ch. If Rate Up 1% 0.0% 0.0% 0.0% 0.0%

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 431936074.xls

n and Interest Rate Sensitivity

Page 21