Copyright

Walt Disney Company's Slepping Beauty Bonds-Duration Analysis-courseware

Harvard Business School Case 294-038
Courseware 9-208-725
This courseware was prepared by Professor Carliss Y. Baldwin solely for students as the basis for class discussion.
Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective
management. Copyright 2008 President and Fellows of Harvard College. No part of this product may be
reproduced, stored in a retrieval system, used in a spreadsheet or transmitted in any form or by any means
electronic, mechanical, photocopying, recording or otherwisewithout the permission of Harvard Business School.

258325566.xls

Sleeping Beauty Basic Spreadsheet

Calendar
Year

1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

Relative
Year

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30

Cash Flow
per $100

7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55

Present
Value
interes
t rate
75.50
10%
88.31 8.55%
100.00 7.55%

Page 2

Each Cash Flow

258325566.xls

Sleeping Beauty Present Value as a Function of the Interest Rate

Calendar
Year

Relative
Year

Cash Flow
per $100

1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55

Page 3

Interest
Rates
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
20%
100%
500%
1000%

Present
Values
$339.20
$243.54
$186.85
$150.55
$125.74
$107.84
$94.38
$83.89
$75.50
$68.64
$62.92
$58.08
$53.93
$50.33
$47.19
$44.41
$41.94
$39.74
$37.75
$7.55
$1.51
$0.76

258325566.xls

the Interest Rate

Page 4

258325566.xls

Sleeping Beauty Bonds of Different Maturity

Calendar
Year

Relative
Year

1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39

Cash Flow per $100

Sleeping
Napping
Beauties
Beauties

7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55

7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
7.55
107.55

Interest
Rates
2%
3%
4%
5%
6%
7%
7.55%
8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
20%

if investor doesnot find prod

after 10 years if interest rate

for a fluctuation in interest r

120.00
100.00
80.00
60.00
40.00
20.00
0.00
1

Page 5

258325566.xls

Present Value
Sleeping
Napping
Beauties
Beauties
$339.20
$243.78
$186.99
$150.61
$125.76
$107.85
$100.00
$94.38
$83.89
$75.50
$68.64
$62.92
$58.08
$53.93
$50.33
$47.19
$44.41
$41.94
$39.74
$37.75

$149.85
$138.81
$128.79
$119.69
$111.41
$103.86
$100.00
$96.98
$90.69
$84.95
$79.68
$74.86
$70.43
$66.36
$62.61
$59.16
$55.98
$53.04
$50.32
$47.80

if investor doesnot find product is not different, he wont pay different

after 10 years if interest rates remains same, the price of the bond will remain same
for a fluctuation in interest rates, sleeping beauty will have greater variation in prices then napping beauty

120.00
100.00
80.00
60.00
40.00
20.00
0.00
1

8
Page 6

10

Present Value

258325566.xls

Present Value of a 100-year and a 10-year

Bond as a Function of the Interest Rate
$200.00

100-year bonds

$150.00

$100.00

10-year bonds

$50.00

$0.00
2%

3%

4%

5%

6%

7%

8%

9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%

Interest Rate

Page 7

258325566.xls

Sleeping Beauty Calculation of Duration

Calendar
Year

Relative
Year Sleeping Beauties
Interest
Rate
Duration
(in Years)

1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39

7.55%

10-Year Bond

30-Year Bond

7.55%

7.55%

14.24

7.02
6.53
6.07
5.64
5.25
4.88
4.54
4.22
3.92
3.65
3.39
3.15
2.93
2.73
2.53
2.36
2.19
2.04
1.89
1.76
1.64
1.52
1.42
1.32
1.22
1.14
1.06
0.98
0.91
0.85
0.79
0.74
0.68
0.64
0.59
0.55
0.51
0.48
0.44

7.37

7.02
6.53
6.07
5.64
5.25
4.88
4.54
4.22
3.92
51.94

Page 9

519.41

12.64

7.02
6.53
6.07
5.64
5.25
4.88
4.54
4.22
3.92
3.65
3.39
3.15
2.93
2.73
2.53
2.36
2.19
2.04
1.89
1.76
1.64
1.52
1.42
1.32
1.22
1.14
1.06
0.98
0.91
12.11

258325566.xls

2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
2065
2066
2067
2068
2069
2070
2071
2072
2073
2074
2075
2076
2077
2078
2079
2080
2081
2082

40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89

0.41
0.38
0.36
0.33
0.31
0.29
0.27
0.25
0.23
0.21
0.20
0.18
0.17
0.16
0.15
0.14
0.13
0.12
0.11
0.10
0.10
0.09
0.08
0.08
0.07
0.07
0.06
0.06
0.05
0.05
0.05
0.04
0.04
0.04
0.03
0.03
0.03
0.03
0.03
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.01
0.01
0.01
0.01

Page 10

258325566.xls

2083
2084
2085
2086
2087
2088
2089
2090
2091
2092
2093

90
91
92
93
94
95
96
97
98
99
100

0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.07

Page 11

258325566.xls

30-Year Zero
7.55%

30.00 sensitivity (modified duration zero bond is highly sensitive

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
100

13.235891737

Page 12

258325566.xls

Page 13

258325566.xls

Page 14

258325566.xls

Sleeping Beauty Sensitivity Up

Calendar
Year

Relative Sleeping
Year
Beauty

10-Year
Bond

30-Year
Bond

30-Year
Zero

8.55%

8.55%

8.55%

8.55%

88.31
-11.69%

93.45
-6.55%

89.30
-10.70%

75.76
-24.24%

6.96
6.41
5.90
5.44
5.01
4.61
4.25
3.92
3.61
3.32
3.06
2.82
2.60
2.39
2.21
2.03
1.87
1.72
1.59
1.46
1.35
1.24
1.14
1.05
0.97
0.89
0.82
0.76
0.70
0.64
0.59
0.55
0.50
0.46
0.43
0.39
0.36
0.33

6.96
6.41
5.90
5.44
5.01
4.61
4.25
3.92
3.61
47.35

6.96
6.41
5.90
5.44
5.01
4.61
4.25
3.92
3.61
3.32
3.06
2.82
2.60
2.39
2.21
2.03
1.87
1.72
1.59
1.46
1.35
1.24
1.14
1.05
0.97
0.89
0.82
0.76
0.70
9.18

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
75.7561

Interest
Rate
Value @ 8.55%
% Ch. In Value
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38

Page 15

258325566.xls

2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
2065
2066
2067
2068
2069
2070
2071
2072
2073
2074
2075
2076
2077
2078
2079
2080
2081

39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88

0.31
0.28
0.26
0.24
0.22
0.20
0.19
0.17
0.16
0.15
0.14
0.12
0.12
0.11
0.10
0.09
0.08
0.08
0.07
0.06
0.06
0.05
0.05
0.05
0.04
0.04
0.04
0.03
0.03
0.03
0.03
0.02
0.02
0.02
0.02
0.02
0.02
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01

Page 16

258325566.xls

2082
2083
2084
2085
2086
2087
2088
2089
2090
2091
2092
2093

89
90
91
92
93
94
95
96
97
98
99
100

0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.03

Page 17

258325566.xls

Sleeping Beauty Sensitivity Down

Calendar
Year

Relative Sleeping
Year
Beauty

10-Year
Bond

30-Year
Bond

30-Year
Zero

6.55%

6.55%

6.55%

6.55%

115.24
15.24%

107.17
7.17%

112.99
12.99%

132.35
32.35%

7.09
6.65
6.24
5.86
5.50
5.16
4.84
4.54
4.27
4.00
3.76
3.53
3.31
3.11
2.92
2.74
2.57
2.41
2.26
2.12
1.99
1.87
1.75
1.65
1.55
1.45
1.36
1.28
1.20
1.13
1.06
0.99
0.93
0.87
0.82
0.77
0.72
0.68

7.09
6.65
6.24
5.86
5.50
5.16
4.84
4.54
4.27
57.03

Interest
Rate
Value 6.55%
% Ch. In Value
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38

7.09
0
6.65
0
6.24
0
5.86
0
5.50
0
5.16
0
4.84
0
4.54
0
4.27
0
4.00
0
3.76
0
3.53
0
3.31
0
3.11
0
2.92
0
2.74
0
2.57
0
2.41
0
2.26
0
2.12
0
1.99
0
1.87
0
1.75
0
1.65
0
1.55
0
1.45
0
1.36
0
1.28
0
1.20
0
16.03 132.3454

Page 18

258325566.xls

2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
2065
2066
2067
2068
2069
2070
2071
2072
2073
2074
2075
2076
2077
2078
2079
2080
2081

39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88

0.64
0.60
0.56
0.53
0.49
0.46
0.43
0.41
0.38
0.36
0.34
0.32
0.30
0.28
0.26
0.25
0.23
0.22
0.20
0.19
0.18
0.17
0.16
0.15
0.14
0.13
0.12
0.11
0.11
0.10
0.09
0.09
0.08
0.08
0.07
0.07
0.06
0.06
0.06
0.05
0.05
0.05
0.04
0.04
0.04
0.04
0.03
0.03
0.03
0.03

Page 19

258325566.xls

2082
2083
2084
2085
2086
2087
2088
2089
2090
2091
2092
2093

89
90
91
92
93
94
95
96
97
98
99
100

0.03
0.03
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.01
0.19

Page 20

258325566.xls

Sleeping Beauty The Relation between Duration and Interest Rate Sen
Sleeping
Beauty

10-Year
Bond

30-Year
Bond

30-Year
Zero

% Ch if Rate Down 1%

15.2%

7.2%

13.0%

32.3%

Duration

14.24

7.37

12.64

30.00

-11.7%

-6.5%

-10.7%

-24.2%

% Ch. If Rate Up 1%

In a short term bond, the average duration changes drastically wher

Page 21

258325566.xls

n and Interest Rate Sensitivity

ge duration changes drastically where as in long term bond the averge duration change slowly so the senstivity changes slo

Page 22

258325566.xls

ly so the senstivity changes slowly in long term bond

Page 23