Data Suppose that on March 27, 2020, an investor owns euro 100,000 of the French OAT...
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Data Suppose that on March 27, 2020, an investor owns euro 100,000 of the French OAT benchmark 7.5% maturing in April 2030. This bond pays coupon flows of euro 7,500 each over the next 10 years and returns the principal investment at maturity. One of these flows occurs in 6.08 years, between the standard vertices of 5 and 7 years (for which volatilities and correlations are available). RiskMetrics data for March 27, 2020 Yield, % RiskMetrics Vertes 5yr 7yr 7.628 Price volatility 7.794 (1.650t), % 0.533 Correlation Matrix pij 5 yr 1.000 0.696 1. First, calculate the actual cash flow's interpolated yield. 2. Then determine the actual cash flow's present value. You may use PV=Cash Flow/(1+yield)^(time period). 0.963 7yr 0.963 1.000 Data Suppose that on March 27, 2020, an investor owns euro 100,000 of the French OAT benchmark 7.5% maturing in April 2030. This bond pays coupon flows of euro 7,500 each over the next 10 years and returns the principal investment at maturity. One of these flows occurs in 6.08 years, between the standard vertices of 5 and 7 years (for which volatilities and correlations are available). RiskMetrics data for March 27, 2020 Yield, % RiskMetrics Vertes 5yr 7yr 7.628 Price volatility 7.794 (1.650t), % 0.533 Correlation Matrix pij 5 yr 1.000 0.696 1. First, calculate the actual cash flow's interpolated yield. 2. Then determine the actual cash flow's present value. You may use PV=Cash Flow/(1+yield)^(time period). 0.963 7yr 0.963 1.000
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