Calculating Modified Duration

Use the modified duration of the bond to calculate the percentage change in price of the bond, using the rise and fall in interest rates in the spreadsheet. Compare that to the value of bond that you calculated in the Excel sheet in cells 29J and 42J. Does the modified duration over- or underestimate the price change in each case? Explain.

D E F G H I J A B Steps to calculate auration of bona 17 15 16 8 8a 8b Duration Modified duration 0.9767578 0.9542145 In Excel, Click on Formulas in the main menu. Highlight the cell where you want to calculate duration Choose the function "duration" from Financial formulas Choose the function "mduration" from Financial formulas 8C Value of bond following 0.8% rise in interest rates Settelement date Maturity date Coupon rate Yield Redemption value Frequency Price 11/11/20201 11/15/2021 4.725% 5.525% 100 2 99.222967 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 Value of bond using modified duration %AP Approximate Price -0.0076337 99.236031 Value of bond following 0.6% fall in interest rates Settelement date Maturity date Coupon rate Yield Redemption value Frequency Price |11/11/2020 11/15/2021 4.725% 4.125% 100 2 100.58774 Value of bond using modified duration %AP Approximate Price 0.0057253 100.57192