Investment Science: The Price of a bond and it's duration using excel/spreadsheet

Saturday, September 18, 2010

In this post, we will compute the price of a bond and it's duration using a an excel/spreadsheet, as always I use openoffice for my spreadsheet computations and you can always import the openoffice spreadsheet as a Windows compatible excel file.

For calculating the price of the bond and it's duration, we will take a sample problem from Investment Science by Luenberger (Problem 3.10)

Problem 3.10 Find the price and duration of a 10-year, 8% bond that is trading at a yield of 10%.

Based on the formula for the price of a bond and it's duration as discussed in the previous article, we know that for the above case

The price of the bond P = $83.537
Duration of the bond D = 6.84

The same can be calculated quite easily using the below excel/spreadsheet which can be re-used to calculate the price/duration of any bond.

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