Another way to evaluate a bond is to use the modified DURATION, or MDURATION function. The MDURATION function divides a bond’s duration by 1 plus the market yield divided by the number of coupon payments per year. The resulting figure is more conservative than the straight duration calculation because it’s less sensitive to changes in yield.
- [Instructor] In the previous movie,…I showed you how to evaluate a bond…by using the duration function.…Another way to evaluate a bond is to use the…modified duration, or mduration function.…The mduration function is a more conservative…evaluation than the straight duration calculation…because it is less sensitive to changes in yield.…I'll demonstrate how to use the mduration function…and also compare it directly to duration.…In this movie, my sample file is…CalculatingModifiedDuration_04_08…and you can find it in the Chapter 4 folder…of your exercise files collection.…
Mduration uses the same arguments as the duration function,…so in cell C3, you can see the settlement date.…That's the date that you actually take possession…of the security.…C4 is the maturity date.…The date the investment ends.…Coupon interest in cell C5 is the amount…of interest you receive spread out…among your coupon payments in a year.…Yield in C6 is the annual percentage yield,…or the amount that your principal goes up each year.…
That's independent of the coupon interest.…
Author
Curt Frye
Released
10/7/2016- 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
Duration
Views
-
Introduction
-
Welcome58s
-
-
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
-
Conclusion
-
Next steps1m 12s
-
Take notes with your new membership!
Type in the entry box, then click Enter to save your note.
Press on any video thumbnail to jump immediately to the timecode shown.
Notes are saved with you account but can also be exported as plain text, MS Word, PDF, Google Doc, or Evernote.
Share this video
Embed this video
Video: Calculating the duration of a security using the Macauley method (MDURATION)