23 24 Question 2 Today is October 31, 2022. You have been tasked with analyzing a...

Transcribed Image Text:

23 24 Question 2 Today is October 31, 2022. You have been tasked with analyzing a $1,000 face value bond with a 3,80 % coupon rate. The bond matures in 10 years and pays coupon payments annually (the first coupon payment occurs one year from today). The bond's yield to maturity is 24.00%. Note: Use '1' (Actual/actual) for any Excel functions requiring a day count basis. 25 26 a) Calculate the price of the bond using the table template provided as well as the NPV function. 27 b) Calculate the band's duration using the table template provided as well as the DURATION function. 28 d) Suppose the bond's yield to maturity decreases by 20 basis points. Use NPV to calculate the new bond price 29 d) Use the bond's duration and the duration approximation of price change' equation to estimate the new bond price resulting from the decrease in yield. e) Use the DURATION function to calculate the bond's duration for various coupon rates (use values from 0% to 12% increasing by 1%). On the 02 worksheet, describe the relation between the coupon rate and duration (ie, does duration increase, or decrease, or increase then decrease, or decrease then increase?). Explain the intuition behind your answer. 30 31 32 33 Use the DURATION function to calculate the bond's duration for various maturities (use values from 2 to 30 years increasing by 2). On the Q2 worksheet, describe the relation between the bond's maturity and duration (le, does duration increase, or decrease, or increase then decrease, or decrease then increase?). Explain the intuition behind your answer. 814 WE Nex: pea ng pan var ciddag" Intructions best 201 Pemer 02 Equations 2 Pes mond PUTER S 634 H M xv fx sponse. Marty 3 5 1. 14 IN M 12 144 44 WA butions 10 Muty (0) 20 Equations Surat Fe "1 23 24 Question 2 Today is October 31, 2022. You have been tasked with analyzing a $1,000 face value bond with a 3,80 % coupon rate. The bond matures in 10 years and pays coupon payments annually (the first coupon payment occurs one year from today). The bond's yield to maturity is 24.00%. Note: Use '1' (Actual/actual) for any Excel functions requiring a day count basis. 25 26 a) Calculate the price of the bond using the table template provided as well as the NPV function. 27 b) Calculate the band's duration using the table template provided as well as the DURATION function. 28 d) Suppose the bond's yield to maturity decreases by 20 basis points. Use NPV to calculate the new bond price 29 d) Use the bond's duration and the duration approximation of price change' equation to estimate the new bond price resulting from the decrease in yield. e) Use the DURATION function to calculate the bond's duration for various coupon rates (use values from 0% to 12% increasing by 1%). On the 02 worksheet, describe the relation between the coupon rate and duration (ie, does duration increase, or decrease, or increase then decrease, or decrease then increase?). Explain the intuition behind your answer. 30 31 32 33 Use the DURATION function to calculate the bond's duration for various maturities (use values from 2 to 30 years increasing by 2). On the Q2 worksheet, describe the relation between the bond's maturity and duration (le, does duration increase, or decrease, or increase then decrease, or decrease then increase?). Explain the intuition behind your answer. 814 WE Nex: pea ng pan var ciddag" Intructions best 201 Pemer 02 Equations 2 Pes mond PUTER S 634 H M xv fx sponse. Marty 3 5 1. 14 IN M 12 144 44 WA butions 10 Muty (0) 20 Equations Surat Fe "1 23 24 Question 2 Today is October 31, 2022. You have been tasked with analyzing a $1,000 face value bond with a 3,80 % coupon rate. The bond matures in 10 years and pays coupon payments annually (the first coupon payment occurs one year from today). The bond's yield to maturity is 24.00%. Note: Use '1' (Actual/actual) for any Excel functions requiring a day count basis. 25 26 a) Calculate the price of the bond using the table template provided as well as the NPV function. 27 b) Calculate the band's duration using the table template provided as well as the DURATION function. 28 d) Suppose the bond's yield to maturity decreases by 20 basis points. Use NPV to calculate the new bond price 29 d) Use the bond's duration and the duration approximation of price change' equation to estimate the new bond price resulting from the decrease in yield. e) Use the DURATION function to calculate the bond's duration for various coupon rates (use values from 0% to 12% increasing by 1%). On the 02 worksheet, describe the relation between the coupon rate and duration (ie, does duration increase, or decrease, or increase then decrease, or decrease then increase?). Explain the intuition behind your answer. 30 31 32 33 Use the DURATION function to calculate the bond's duration for various maturities (use values from 2 to 30 years increasing by 2). On the Q2 worksheet, describe the relation between the bond's maturity and duration (le, does duration increase, or decrease, or increase then decrease, or decrease then increase?). Explain the intuition behind your answer. 814 WE Nex: pea ng pan var ciddag" Intructions best 201 Pemer 02 Equations 2 Pes mond PUTER S 634 H M xv fx sponse. Marty 3 5 1. 14 IN M 12 144 44 WA butions 10 Muty (0) 20 Equations Surat Fe "1 23 24 Question 2 Today is October 31, 2022. You have been tasked with analyzing a $1,000 face value bond with a 3,80 % coupon rate. The bond matures in 10 years and pays coupon payments annually (the first coupon payment occurs one year from today). The bond's yield to maturity is 24.00%. Note: Use '1' (Actual/actual) for any Excel functions requiring a day count basis. 25 26 a) Calculate the price of the bond using the table template provided as well as the NPV function. 27 b) Calculate the band's duration using the table template provided as well as the DURATION function. 28 d) Suppose the bond's yield to maturity decreases by 20 basis points. Use NPV to calculate the new bond price 29 d) Use the bond's duration and the duration approximation of price change' equation to estimate the new bond price resulting from the decrease in yield. e) Use the DURATION function to calculate the bond's duration for various coupon rates (use values from 0% to 12% increasing by 1%). On the 02 worksheet, describe the relation between the coupon rate and duration (ie, does duration increase, or decrease, or increase then decrease, or decrease then increase?). Explain the intuition behind your answer. 30 31 32 33 Use the DURATION function to calculate the bond's duration for various maturities (use values from 2 to 30 years increasing by 2). On the Q2 worksheet, describe the relation between the bond's maturity and duration (le, does duration increase, or decrease, or increase then decrease, or decrease then increase?). Explain the intuition behind your answer. 814 WE Nex: pea ng pan var ciddag" Intructions best 201 Pemer 02 Equations 2 Pes mond PUTER S 634 H M xv fx sponse. Marty 3 5 1. 14 IN M 12 144 44 WA butions 10 Muty (0) 20 Equations Surat Fe "1

Answer rating: 100% (QA)

The images youve provided appear to show a bond analysis exercise probably as part of a finance or accounting class or examination The text in the first image outlines a scenario and a set of question... View the full answer