For the calculation of money duration for the Practice Problem Q5 Page 292, specifically for Bonds One, Two, and Three.
I encountered difficulty in obtaining the calculated money duration values. Despite multiple attempts, I was unable to arrive at the figures mentioned in the solution. Specifically, the provided money duration values are 176.960 for Bond One, 182.609 for Bond Two, and 179.253 for Bond Three.
Kindly help for this .
I have no idea how they got those numbers.
They don’t seem to make sense.
Thanks for your reply. However, is the money duration formula is Full price times Modified Duration? if that do so, the answer should be 406.88, (114.972 times 3.539). Am i right ?
Yes.
Money duration = modified duration x amount invested.
In each case $50m is invested (row 3 in table)
B1 : 50 x 3.539 = 176.95
B2 : 50 x 3.652= 182.6
B3 : 50 x 3.585 = 179.25
If you wanted money duration per 100 par
B1 : 114.972 x 3.529 = 406.88
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I feel silly.