Solution Library

Calculation of Percentage Change in Bonds Price when Interest Rate Changes


What are the duration and modified duration of a seven-year, 3.5 percent coupon rate, annual coupon payment, $1000 par value government note priced today to yield 3 percent to maturity (use the text formulas or Excel’s Duration and MDuration functions)?  What is the convexity of this instrument?  [Recall that Bonds and Bond Properties.xls illustrates these calculations.]  Using one of the following approximation formulas with yield data in decimal form,

[if text formula] % Change in Price 100 (-1.0 Duration (YieldNew-YieldOld)/(1+YieldOld)),

[if Excel function]  % Change in Price 100 (-1.0 MDuration (YieldNew-YieldOld)),

what is the approximate percentage change in this bond's price if yields on comparable securities rise to 4 percent?  What is the actual percentage change in this bond's price if yields on comparable securities rise to 4percent (use a financial calculator or Excel’s PV function)?


This question belongs to finance and discusses about Macaulay duration and modified duration of bonds.

Total word count: 71


Download Full Solution


  • HWA

    this is a very good website

  • HWA

    I have 50 questions for the same test your page is showing only 28

  • HWA

    hi can you please help or guide me to answer my assignments. thanks

  • HWA

    hi can anyone help or guide me to my assignments. thanks

  • HWA

  • HWA

    This solution is perfect ...thanks

  • HWA

    Hello Allison,I love the 2nd image that you did! I also, had never heard of SumoPaint, is something that I will have to exolpre a bit! I understand completely the 52 (or so) youtube videos that you probably watched. Sometimes they have what you want, sometimes they don't! However, it is always satisfying when you are able to produce something that you have taught yourself. Great job!Debra 0 likes

  • HWA

    Perfect bank of solution. 

  • HWA

    great !

  • HWA
    Paul Brandon-Fritzius

    thanks for the quick response. the solution looks good. :)

  • HWA
    tina Johnson

    thnx for the answer. it was perfect. just the way i wanted it. 

  • HWA

    works fine.