Modified Duration = Duration / (1+YTM)
Duration = Sum [ Weight * Year ]
|
Year |
CF |
PVF @6.9% |
Disc CF |
Weight |
Duration |
| 1 |
$Â Â Â Â Â 69.00 |
   0.9355 |
$Â Â 64.55 |
   0.0645 |
        0.06 |
| 2 |
$Â Â Â Â Â 69.00 |
   0.8751 |
$Â Â 60.38 |
   0.0604 |
        0.12 |
|
3 |
$Â Â Â Â Â 69.00 |
   0.8186 |
$Â Â 56.48 |
   0.0565 |
        0.17 |
| 4 |
$Â Â Â Â Â 69.00 |
   0.7658 |
$Â Â 52.84 |
   0.0528 |
        0.21 |
|
4 |
$
1,000.00 |
   0.7658 |
$
765.75 |
   0.7658 |
        3.06 |
|
Duration |
       Â
3.63 |
Modfied duration = Duration / ( 1+YTM)
= 3.63 / ( 1 + 0.069)
= 3.63 / 1.069
= 3.40%
Modified duartion is 3.40%
