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oMMcpn_Price( ) Example

Description

A CD is issued on January 15 2003 for $1 million for 270 days (maturity date is October 12 2003) with a 5.5% coupon. The accrual basis is actual/360. If the market yield on February 2 2003 is 5.75%, then the fair value of the instrument is calculated as follows:

 

 

Function Specification

=oMMcpn_Price(0.0575, "2/2/03", "15/1/03", "12/10/03", 1000000, 0.055, 1, 0)

 

 

Solution

The maturity proceeds of the instrument is calculated as follows:

Equation Template

where:
FV = $1,000,000
CR = 5.5%
DIP = 270 (12/10/03 - 15/1/03)
DIY = 360

 

 

 

The dirty price of the instrument is calculated as follows:

Equation Template

where:
MP = $1,041,250
y = 5.75%
DIP = 252 (12/10/03 - 2/2/03)
DIY = 360

 

 

Accrued interest is determined as follows:

Equation Template

where:
Nominal Coupon = 1,000,000*0.0575
Days Accrued = 252 (2/2/03 - 15/1/03)
Days in Period = 360

 

 

 

The following results are obtained from setting the output flag to 0.

Yield

0.0575000

Clean Price

998,211.3074

Accrued Interest

2,750.0000

Dirty Price

1,000,961.3074

Coupon Amount

41,250.0000

Macaulay Duration

0.700000

Modified Duration

0.672915

Convexity

0.9056296

Price Value of a Basis Point

67.356204

 

 

For further details on how the above prices and statistics are calculated, see the money market formula.

 

 

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