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Business Studies

impact of growing maturity on duration

Using the spreadsheet on Blackboard called “Duration/Convexity”
1. impact of growing maturity on duration
Set Life in years to 20 years (that is a 20 year T-Note with biannual payments).
Compare Modified Duration and Convexity with a Treasury that has a life of 2 years.
2. Impact of growing coupon rate on duration
Set Life to 20 years.
Compare coupon rate of 10% to coupon rate of 2% (always make sure that Coupon rate = yield)
3. Create a chart with Duration on the Y axis and Life in years on the X axis.
4 Create a chart with Duration on the Y axis and Coupon Rate on the X axis.