Question

How can you calculate duration on a TI -84 Plus calculator?

For example, how would I solve this on a TI-84?

Calculate the Macaulay duration of a bond with five years to maturity, a coupon rate of 8% and a market rate of 10%.

Answer 1

An example to make it clear:You will have to use a workaround:

You know the formula for duration is Sum(t*PV of Cash flows at t)/(Sum PV Cash flows)

You can first calculate the bond price and write it somewhere

Now you calculate the NPV with cash flows as

CF0=0

CF1=1*6%*1000=60

CF2=2*6%*1000=120

CF3=3*6%*1000=180

CF4=4*6%*1000=240

CF5=5*6%*1000=300

CF6=6*(1000+6%*1000)=6360

Calculate NPV at 6%

Divide the NPV by the price you obtained earlier

Alternatively: Duration=(1*60/1.06+2*60/1.06^2+3*60/1.06^3+4*60/1.06^4+5*60/1.06^5+6*1060/1.06^6)/(60/1.06+60/1.06^2+60/1.06^3+60/1.06^4+60/1.06^5+1060/1.06^6)

You can calculate this like other mathematical operations