Bond Duration Formulas
For a standard bond with fixed, semi-annual payments the bond duration closed-form formula is:
- FV = par value
- C = coupon payment per period (half-year)
- i = discount rate per period (half-year)
- a = fraction of a period remaining until next coupon payment
- m = number of full coupon periods until maturity
- P = bond price (present value of cash flows discounted with rate i)
For a bond with coupon frequency but an integer number of periods (so that there is no fractional payment period), the formula simplifies to:
where
- y = Yield (per year, in decimal form),
- c = Coupon (per year, in percent),
- m = Number of coupon periods.
Read more about this topic: Bond Duration
Famous quotes containing the words bond, duration and/or formulas:
“They lived under a just and moderate government, and they admitted that one bond of their fidelity was that their rulers were the better men.”
—Titus Livius (Livy)
“Higher than the question of our duration is the question of our deserving. Immortality will come to such as are fit for it, and he would be a great soul in future must be a great soul now.”
—Ralph Waldo Emerson (1803–1882)
“It is sentimentalism to assume that the teaching of life can always be fitted to the child’s interests, just as it is empty formalism to force the child to parrot the formulas of adult society. Interests can be created and stimulated.”
—Jerome S. Bruner (20th century)