The following table provides prices of 4 government bonds with different time to maturity, with a...
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The following table provides prices of 4 government bonds with different time to maturity, with a coupon of 8% and a par value of $100. Time to maturity 2 3 4 Price $ 105.882 $ 109.643 $ 110.024 $ 107.940 A. (6 points) Calculate the yield curve for years 1-4? Is the curve going up or down? B. (6 points) What is the current expectation to the interest rate for two years starting in 2 years (f2,2)? C. (6 points) In two year from now you want to take on a loan of $500, which you plan to pay back at year t=4. How can you guarantee the interest rate on this loan based on today's prices, if there is not market for forward interest contracts? show complete numerical solution D. (7 points) The duration of a (different) fixed coupon bond with a maturity of 4 years is 3.50465. What is the bond's coupon rate? If interest rates rise by 2%, by how much will the price of the bond go up or down? The following table provides prices of 4 government bonds with different time to maturity, with a coupon of 8% and a par value of $100. Time to maturity 2 3 4 Price $ 105.882 $ 109.643 $ 110.024 $ 107.940 A. (6 points) Calculate the yield curve for years 1-4? Is the curve going up or down? B. (6 points) What is the current expectation to the interest rate for two years starting in 2 years (f2,2)? C. (6 points) In two year from now you want to take on a loan of $500, which you plan to pay back at year t=4. How can you guarantee the interest rate on this loan based on today's prices, if there is not market for forward interest contracts? show complete numerical solution D. (7 points) The duration of a (different) fixed coupon bond with a maturity of 4 years is 3.50465. What is the bond's coupon rate? If interest rates rise by 2%, by how much will the price of the bond go up or down?
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B let the year 2 be the base year for year 3 for interest ra... View the full answer
Related Book For
Essentials of Business Analytics
ISBN: 978-1285187273
1st edition
Authors: Jeffrey Camm, James Cochran, Michael Fry, Jeffrey Ohlmann , David Anderson, Dennis Sweeney, Thomas Williams
Posted Date:
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