BA 4827 – Fixed Income Analysis

Formula Sheet for the First Interim Exam

FVn
1. PV 2. FVn  PV(1  r) n
(1  r ) n
 1 
1 
 (1  r ) n   (1  r )  1
n

3. PVA  PMT   4. FVA n  PMT  

 r   r
 

 1 
1  (1  r ) n 
M
5. Bond Value = P = +C 
(1  r ) n  r 
 
n
C

M
6. Bond Value = P = + t 1
t 1 (1  r ) (1  r ) v
n 1
(1  r ) (1  r ) v

Annual Dollar Coupon Interest

7. Current Yield =
Pr ice
( 1  r )n  1 
8. Coupon Interest + Interest on Interest = C  
 r 
1/ h
 Total Future Dollars 
9. Total Return =    1
 Purchase price of bond 
1C 2C nC nM
  ...  
1 y (1 y ) 2
(1 y ) n
( 1  y )n
10. Macaulay Duration =
P

Duration in m periods per year

11. Duration in years =
m
C  1  n(1000  C / y )
1 
2 
 
Macaulay Duration y  (1  y )
n
 (1  y ) n 1
12. Modified Duration = =
(1  y) P

13. Approximate percentage price change = - Modified Duration × Δy

P  P
14. Approximate Duration =
2( P0 )(y )
 n
t( t  1 )C n( n  1 )M
2
d P 1
(1 y )
t 1
t 2

( 1  y )n2
15. Convexity Measure = 
dy 2 P P

Convexity in m periods per year

16. Convexity in years =
m2

2C  1  2Cn n(n  1)(1000  C / y )

1 
3 
  2 n 1

y  (1  y ) n  y (1  y ) (1  y ) n  2
17. Convexity Measure =
P

18. Approximate percentage price change due to convexity = 1/2(Convexity Measure)(Δy)2

P  P  2 P0
19. Approximate Convexity =
( P0 )(y ) 2
VSE, S  VSE, F
20. SEDUR =
2V0 (y )

VLE , F  VLE , S
21. LEDUR =
2V0 (y )

22. After Tax Yield = Pre Tax Yield (1-marginal tax rate)

Tax Exempt Yield

23. Equivalent Taxable Yield =
1  M arg inal Tax Rate

24. Bond equivalent yield of Eurodollar bond=2[(1+yield to maturity on Eurodollar bond)1/2-1]

2
 yield to maturity on bond equivalent basis 
25. Yield to maturity on annual pay basis= 1   1
 2 

SMM = 1  (1  CPR )
1 / 12
26.

27. Semiannual cash flow yield = (1+yM)6 – 1

28. Bond-equivalent yield = 2[(1+yM)6 – 1]

29. (1+zk)k = (1+zi)i (1+ifj)j where i+j=k