Comparing coupon bonds with different investment periods can be difficult. However, there is a method that you can use to calculate a common value that lets you evaluate a bond based on its sensitivity to changes in its yield. In Excel, you implement that method using the DURATION function. You can use the DURATION function to discover how sensitive your investment is to changes in its yield.
- [Narrator] Comparing coupon bonds…with different investment periods can be difficult.…However, there is a method that you can use…to calculate a common value that lets you…evaluate a bond based on its sensitivity…to changes in its yield.…In Excel, you implement that method…using the duration function.…I'll demonstrate how to use it in this movie.…My sample file is CalculatingDuration_04_07…which is a sample file that you can find…in the Chapter04 folder of your Exercise Files collection.…I need to know six different bits of information…to perform a calculation for a particular security.…
The first is the settlement date,…and that is the date that you actually take possession…of the security.…Next is the maturity date,…and that is the date that the investment ends.…That's in C4.…In C5 is the coupon interest.…That is the amount of interest you receive…with each coupon payment.…In C6 is the yield.…That is the annual percentage appreciation…of the investment, and that is independent…of coupon interest.…Frequency is the number of coupons paid per year.…
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- Analyzing loans, payments, and interest
- Calculating depreciation
- Determining values and rates of return
- Calculating bond coupon dates and security durations
- Calculating security prices and yields
- Calculating prices and yields of securities with odd periods
- Analyzing simulation results
Skill Level Intermediate
1. Analyzing Loans, Payments, and Interest
2. Calculating Depreciation
3. Determining Values and Rates of Return
4. Calculating Bond Coupon Dates and Security Durations
5. Calculating Security Prices and Yields
6. Analyzing Simulation Results
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