BOND DURATION

(C) Copyright, 1984 by the American Association of Individual
    Investors

Bond investors are exposed to four risks:   default risk, call
risk, price volatility, and reinvestment rate risk.  The bond
duration measure provides information about how sensitive a bond
price is to changes in interest rate levels, and also specifies the
holding period which will minimize the impact of price volatility
and reinvestment rate risks.

The computer program calculates bond duration and the approximate
percentage price change for a given interest rate change.  It
also permits calculation of a portfolio duration using either
dollar values of the bonds in the portfolio or their percentages
of portfolio value.

The program assumes that all bonds being evaluated pay interest
semiannually.  Users are asked to enter coupon rates, years to
maturity (with fractional years expressed in decimal form), and
the bond price as a percent of its face value.  For example, if
the bond has a $5000 face value and its current market price is
$4500, the value entered would be 4500/5000 = 90.  Bond prices
are usually quoted in the financial press in this format.  The
program output includes a restatement of price for $1,000 face
value bonds, yield-to-maturity for each bond, and the bond
duration.

You are also given the option of calculating price
sensitivity to possible interest rate changes for each bond.
This option is elected at the beginning of the program.  For each
bond, the user will be asked to provide a new interest rate.  The
program will then calculate the approximate percentage change in
the bond price which would result from this interest rate
(yield-to-maturity) change.  It also will calculate the correct
bond price based on the revised interest rate.  The user is
allowed to perform these computations for an unlimited number of
interest rate revisions for each bond.  This program will
calculate the duration for a portfolio of all bonds entered.  The
user is permitted to enter either dollar values of bond holdings
or percentages of portfolio value.  The dollar entry format is
best suited for calculating duration for an existing portfolio
while the percentage entry lends itself to rebalancing trials for
arriving at a desired specified portfolio duration.