Question
Build out a model to calculate the duration of a 5 year bond with annual payments. Allow the user to input the coupon and yield.
Build out a model to calculate the duration of a 5 year bond with annual payments. Allow the user to input the coupon and yield. Model should calculate a bond price and a duration. Use this model to calculate a duration for a 5% coupon and 5% yield. Now recalculate duration at 4%. Calculate convexity (choose some scenario and show me the convexity calculation).
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
To build out the model we can use the following steps Calculate the present value of each cash flow coupon payment and principal payment using the formula PV CF 1 rn where PV present value of the cash ...
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Step: 2
Step: 3
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Investments Analysis and Management
Authors: Charles P. Jones
12th edition
978-1118475904, 1118475909, 1118363299, 978-1118363294
