The purpose of this workbook is to demonstrate how to calculate duration, modified duration, and convexity step-by-step using the standard formulas.

The workbook can handle bonds (or other loans) with maturities up to 30 years with payment frequencies of annual, semiannual, quarterly, or monthly. I make use of conditional formatting to make the table look nice, and data validation to make sure that users don't enter non-valid data. The "Calculator" worksheet is protected to avoid inadvertant changes. You can unprotect it without needing a password.

Please note that the formulas used in this workbook only work on a payment date. They do not work between payment dates. Also note that if you just need to calculate duration or modified duration then Excel provides the Duration() and MDuration() functions.

Timothy R. Mayes, Ph.d.Associate Professor of FinanceMetropolitan State College of Denver

Please see http://www.tvmcalcs.com for more Excel solutions.

Bond Price $0.23 $0.18 If Yield Changes By 1.00%Face Value 1,000 1000 Bond Price Will Change By -0.05Coupon Rate 0.00% 0%Life in Years 30 30 Modified Duration Predicts -0.06Yield 30.00% 31% Convexity Adjustment 0.01Frequency 2 2 Total Predicted Change -0.05

Macaulay Duration 30.00 Actual New Price $0.18 Modified Duration 26.09 Predicted New Price $0.18 Convexity 691.87 Difference $0.00

Period Cash Flow PV Cash Flow Duration Calc Convexity Calc0 ($0.23)1 - - - - 2 - - - - 3 - - - - 4 - - - - 5 - - - -

6 - - - - 7 - - - - 8 - - - - 9 - - - -

10 - - - - 11 - - - - 12 - - - - 13 - - - - 14 - - - - 15 - - - - 16 - - - - 17 - - - - 18 - - - - 19 - - - - 20 - - - - 21 - - - - 22 - - - - 23 - - - - 24 - - - - 25 - - - - 26 - - - - 27 - - - - 28 - - - - 29 - - - - 30 - - - -

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31 - - - - 32 - - - - 33 - - - - 34 - - - - 35 - - - - 36 - - - - 37 - - - - 38 - - - - 39 - - - - 40 - - - - 41 - - - - 42 - - - - 43 - - - - 44 - - - - 45 - - - - 46 - - - - 47 - - - - 48 - - - - 49 - - - - 50 - - - - 51 - - - - 52 - - - - 53 - - - - 54 - - - - 55 - - - - 56 - - - - 57 - - - - 58 - - - - 59 - - - - 60 1,000.00 0.23 13.69 631.27

Total 13.69 631.27 Total Total Total Total Total Total Total Total Total Total Total Total

Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total

Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total

Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total

Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total

Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total

Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total

Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total Total

-22.92%

-26.09%3.46%

-22.63%

+0.3771%

i is periodic ratem is payment frequency

DMac is annual

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This workbook is Copyright 2009 by Timothy R. Mayes, Ph.D.

Please visit: http://www.tvmcalcs.com/

You are free to use and redistribute it as long as this notice is kep intact. However, I retain all rights to the worksheet.