DarienHacker

+1 for mohammad. The 9% coupon bond has a lower mod duration than the 6% coupon bond.

Excel has a modified duration function that allows you to play with various inputs to help you understand. Try this:

Today: 9/01/11
Settlement: 9/03/11
Maturity 9/1/2021
Coupon 9%/6%
Yield: 6%/6%
Frequency: 2/2
Price: =price(settlement,maturity,rate,yield,100,frequency)
Modified Duration: =mduration(settlement,maturity,coupon,yield,frequency)

As long as you don't hard code you can play around and see the price changes for the 9% and 6% coupon bond as you move yield up and down.

Edit: If you forget you can always work it via modified duration in your calc



Edited 2 time(s). Last edit at Monday, September 12, 2011 at 07:43PM by turbolt.