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Macaulay Duration Formula Excel Template

The document provides examples of calculating Macaulay duration for bonds using different methods. It shows calculating Macaulay duration by modifying duration, using cash flows, and using the DURATION function in Excel. For two bonds A and B, it displays the coupon, yield, price, modified duration, and Macaulay duration calculated using the modified duration formula. It then provides another example calculating the Macaulay duration of Bond A over 4 years using its cash flows. Finally, it demonstrates calculating Macaulay duration in Excel using the DURATION function by inputting the settlement date, maturity date, coupon, yield, and payment frequency.

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Mustafa Ricky Pramana Se
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348 views6 pages

Macaulay Duration Formula Excel Template

The document provides examples of calculating Macaulay duration for bonds using different methods. It shows calculating Macaulay duration by modifying duration, using cash flows, and using the DURATION function in Excel. For two bonds A and B, it displays the coupon, yield, price, modified duration, and Macaulay duration calculated using the modified duration formula. It then provides another example calculating the Macaulay duration of Bond A over 4 years using its cash flows. Finally, it demonstrates calculating Macaulay duration in Excel using the DURATION function by inputting the settlement date, maturity date, coupon, yield, and payment frequency.

Uploaded by

Mustafa Ricky Pramana Se
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Macaulay Duration Excel Template

Visit: www.educba.com
Email: [email protected]
Let us take the example of two bonds A and B with a similar face value of $100 and a frequency of 2. Bond A has a Coupon o
B has a Coupon of 9% and Yield similar to the coupon at 9%. The maturity of Bond A is in 4 years while Bond B is in 5 years.
value is equal to price like in case of bond B and when the coupon is greater than Yield the price of the bond is higher than f
calculate Macaulay duration using Modified Duration; this is the simplest way to calculate Macaulay duration.

Particluar BOND A BOND B


Coupon 7% 9%
Face value 100 100
Frequency 2 2
Maturity 4 5
Yield 6% 9%

Price is calculated as

BOND A BOND B
Price 103.51 100.00

Modified Duration is calculated as

BOND A BOND B
Modified Duration 3.46 3.96

Macaulay Duration is calculated using the formula given below


Macaulay Duration = Modified Duration * (1 + (Yield/ Frequency))

BOND A BOND B
Macaulay Duratio 3.57 4.13
cy of 2. Bond A has a Coupon of 7% and Yield of 6% on the other hand Bond
ars while Bond B is in 5 years. When Yield is equal to coupon rate face
ce of the bond is higher than face value. In this example we will
caulay duration.
Let us take another example and calculate Macaulay Duration using the longer method. Let us take a Bond A $100 value bon
in four years. The coupon rate is 8% p.a with semi-annual payment. We can expect the following cash flows to occur: 6 mon
2 years: $3, 5 years: $3, 3 years: $3, 5 years: $3, 4 years: $103. Let us now calculate Macaulay Duration using these cash flow

Time (Year) 0.5 1 1.5 2


Cash - Flow 3 3 3 103
Yield 6%

Discount Factor is calculated as

Discount Factor 0.97

Present Value of Cash flow is calculated as

Present Value 2.91 2.83 2.75 91.51

Sum is calculated as

Sum 100

Weighted Cashflow is calculated as

Weighted Cashflow 3 6 9 412

Present Value of Weighted Cashflow is calculated as

Present Value 2.91 5.66 8.24 366.06


of Weighted Cashflow

Sum of Weighted Cashflow is calculated as

Sum of Weighted 382.86


Cashflow

Semiannual Duration is calculated as

Semiannual Duration 3.83

Macaulay Duration is calculated as

Macaulay Duration 1.91


ake a Bond A $100 value bond that pays a 6% coupon rate and matures
g cash flows to occur: 6 months: 3$, 1 year: $3, 5 years: $3,
uration using these cash flows.
One more way of calculating duration is by using an excel spreadsheet by using an inbuilt formula.
The excel DURATION function calculates Macaulay Duration for a par value of $100.

Particular Date/Value
Settlement Date 3/31/2011
Maturity Date 2/28/2021
Coupon 6%
Yield 8%
Frequency 4

Macaulay Duration is calculated as

Macaulay Duration 7.29

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