Question
For your groups institution, compare how short term and long term bond values react differently to same interest rate change. In particular, determine two different
For your groups institution, compare how short term and long term bond values react differently to same interest rate change. In particular, determine two different maturities for two separate bonds: one short term and the other long term. Also, determine all the other relevant terms shared by these two bonds: the face value, the coupon interest rate together with payment frequency, and the discount rate or market interest rate used. Calculate bond values. Then let the discount rate or market interest rate increase by 1%, and recalculate bond values. Compare the changes of the values of each bond. Which one has a bigger change?
I need help putting this into excel
Long term bond:
FV=10,000
Maturity 10 years
Coupon Interest 6%
Payment Frequency 2
Discount rate: 1%
Short term bond:
FV=10,000
Maturity 1 year
coupon interest 6%
payment frequency 2
discount rate 1%
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