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