Computing Accrued Interest (AI)

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To compute accrued interest, press # until the AI variable appears. The

calculator automatically computes AI in terms of dollars per $100 of par

value.

Computing Modified Duration (DUR)

To compute modified duration, press # until the DUR variable appears.

The calculator automatically computes DUR.

Example: Computing Bond Price, Accrued Interest,

and Modified Duration

You consider buying a semiannual corporate bond maturing on

December 31, 2007 and settling on June 12, 2006. The bond is based on

the 30/360 day-count method with a coupon rate of 7%, redeemable at

100% of par value. For an 8% yield to maturity, compute the bond’s

price, accrued interest, and modified duration.

Computing Bond Price, Accrued Interest, and Modified

Duration

Answer: The bond price is $98.56 per 100. The accrued interest is $3.15

per 100. Modified duration is 1.44.

To Press Display

Select Bond worksheet. & l SDT = 12-31-1990

Enter settlement date. 6.1206 ! SDT = 6-12-2006

Enter coupon rate. # 7 ! CPN = 7.00

Enter redemption date. # 12.3107 ! RDT = 12-31-2007

Leave redemption value as is. # RV = 100.00

Select 30/360 day-count

method.

# & V 360

Leave two coupon payments

per year.

# 2/Y

Enter yield. # 8 ! YLD = 8.00

Compute price # % PRI = 98.56

View accrued interest. # AI = 3.15

View modified duration # DUR = 1.44