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Bond Calculations With Excel Functions Use PRICE Function To Find A Bonds Price

The document describes how to use Excel functions to calculate bond prices, yields, duration, and modified duration. It shows the PRICE and YIELD functions to calculate a bond's price and yield given variables like settlement date, maturity date, par value, coupon rate, and yield. It also demonstrates using DURATION and MDURATION to find a bond's duration and modified duration. Finally, it provides steps to calculate a bond's convexity using the bond's prices when the yield is changed in increments.

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Pulkit Batra
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96 views3 pages

Bond Calculations With Excel Functions Use PRICE Function To Find A Bonds Price

The document describes how to use Excel functions to calculate bond prices, yields, duration, and modified duration. It shows the PRICE and YIELD functions to calculate a bond's price and yield given variables like settlement date, maturity date, par value, coupon rate, and yield. It also demonstrates using DURATION and MDURATION to find a bond's duration and modified duration. Finally, it provides steps to calculate a bond's convexity using the bond's prices when the yield is changed in increments.

Uploaded by

Pulkit Batra
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Excel functions

Bond calculations with Excel functions

Use PRICE function to find a bonds price


Time to Maturity
Settlement date 10/1/2020 Years 3 Months
Maturity date 10/1/2023
Par Value 100
Coupon Rate 8.00%
Yield 6.00% <----------------- Market determined
Frequency 1
Basis (Convention) 3 Actual/365

Price 105.35 <----------------- PRICE(Settlement,Maturity,Rate,Yield,Par,Frequency, [Basis])

Use YIELD function to find a bond's yield to maturity


Time to Maturity
Settlement date 10/1/2020 Years 3 Months
Maturity date 10/1/2023
Par Value 100
Rate 8.00%
Price 95.03
Frequency 1
Basis (Convention) 3 Actual/365

Yield 10.00% <----------------- YIELD(Settlement,Maturity,Rate,Price,Par,Frequency, [Basis])

Use DURATION & MDURATION functions to find a bond's duration & modified duration
Time to Maturity
Settlement date 10/1/2020 Years 3 Months
Maturity date 10/1/2023
Par Value 100
Rate 8.00%
Yield 8.00%
Frequency 1 Semi-annual
Basis (Convention) 3 Actual/365

Duration 2.78
Modified duration 2.58

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Excel functions

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turity,Rate,Yield,Par,Frequency, [Basis])

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turity,Rate,Price,Par,Frequency, [Basis])

modified duration

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Step 1 First find Yield of the bond
Settlement date 8/30/2018
Maturity date 8/30/2021
Par Value 100
Rate 9.40%
Price 101
Frequency 1
Basis (Conventio 3 Actual/365

Yield 9.00%

Step 2 Find price of bond when yield changes by some increment, say +/- 1%
P+ P- P0
Settlement date 8/30/2018 8/30/2018
Maturity date 8/30/2021 8/30/2021
Par Value 100 100
Rate 9.40% 9.40%
Change in yield -0.20% 0.20%
Yield 8.80% 9.20%
Frequency 1 1
Basis (Conventio 3 3

Price 101.51 100.49 101

Step 3. Find the Modified duration of the bond


Settlement date 8/30/2018
Maturity date 8/30/2021
Par Value 100
Rate 9.40%
Yield 9.00%
Frequency 1 Semi-annual
Basis (Conventio 3 Actual/365

Duration 2.8
Modified duration 2.5

Step 4.
(P+ - P0)/P0 = - D* x (-∆y) + 0.5 x Convexity x (∆y)2 Eqn 1
(P- - P0)/P0 = - D* x (+∆y) + 0.5 x Convexity x (∆y) 2 Eqn 2
Adding Eqn 1 & Eqn 2
(P+ + P- - 2P0)/P0 = Convexity x (∆y)2
Convexity = (P+ + P- - 2P0) / [P0 x (∆y)2]
Convexity = 8.985

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