Microsoft Office Tutorials and References
In Depth Information
DURATION returns the Macauley duration for an assumed par value.
Notice that in Figure 6.16 the bond settlement date (the date a buyer purchases a coupon
such as a bond) is 5/15/1999 and the maturity date (the date the bond expires) is 7/13/2007.
The securities annual coupon rate is 8.7%. The securities annual yield is 9.2%. The frequency
is semiannual and the basis is Actual/actual. The weighted average equals 5.89 years. By
using cell referencing instead of applying the dates in the formula, your formula becomes
more flexible.
The security’s settlement date. This is the date after the issue date
when the security is traded to the buyer.
The security’s maturity date. The date when the security expires.
The security’s annual coupon rate.
The security’s annual yield.
The number of payments per year—Annual = 1; Semiannual = 2;
Quarterly = 4.
The day count basis to use.
Figure 6.16
The DURATION method
is the weighted average
of the present value of
the cash flows and is
used as a measure of a
bond’s price response
to changes in the yield.
The function
built with cell
EFFECT returns the effective interest rate annually. This is based on the nominal annual
interest rate and the number of compounding periods per year.
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