Consider a $1000 face value, 12 yr , 8% semi annual coupon bond with a YTM of 10.45%. The change in value for a decrease in yield of 38 basis points is A 21.18 B 22.76 C 23.06 D 24.14 Wonder if there is a quick way of doing this without having to use the effective duration formula to calculate Duration, then work backwards to calculate % change in price, then apply to current price. Would take a good 5-6 min to do properly…
c just imput fv=1000 pmt=40 i/y=10.45/2 n=24 cpt pv1 then just change i/y =(10.45-0.38)/2 cpt pv2 substract pv2-pv1
- Do you have the TI BA II Calc? 2. If so use the Bond function 2nd Bond SDT1.0100 --> 1/1/2000 down CPN=8 Enter Down RDT=1.0112 --> 1/1/2012 Enter Down RV=100 Down ACT Down 2/Y Down YLD=10.45 Down PRI CPT --> 83.46 Up YLD=10.07 Enter CPT PRI --> 85.76 Answer --> 2.306 --> This is for 100$ so for 1000$ par == 23.06
FV=1000 PMT= 40 N=24 I/Y= 10.45/2 and the other time (10.45-0.38)/2 PV??? Compute the PV and the difference between them is 23.06.
C You don’t have enough information to use duration here. Just plug in the numbers of your calculator and change the I/Y from 5.225 to 5.035 and calculate the difference. its an extra few clicks on the calculator…should take you less than a min…
Wow CPK, You actually use the bond function? Is there any advantage to use that over the TVM keys?
just that it’s faster…
God its so easy once i see what you guys do!
really? i see u actually have to enter dates and stuff…anyways too late to learn it now.
LongOnCFA Wrote: ------------------------------------------------------- > C > > You don’t have enough information to use duration > here. Just plug in the numbers of your calculator > and change the I/Y from 5.225 to 5.035 and > calculate the difference. > > its an extra few clicks on the calculator…should > take you less than a min… You do, but it’s an approximation to the exact answer offered two ways above.