Consider a Dutch pension fund that has a 150 million investment in a 95-year maturity Austrian government

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Question:

Consider a Dutch pension fund that has a €150 million investment in a 95-year maturity Austrian government bond. This bond has a 2.10% coupon rate, a par value of €100 and a 1.20% yield. The coupon payment frequency is annual. How much would the value of this investment change if the yield rises by 100 basis points to 2.20%? What do you observe about your result? Explain your answer clearly.

Question :

Consider a 15-year Euro area zero-coupon bond with a par value of €100 and an 0.36% implied yield.

a)Calculate the price of this bond

b)Calculate the duration for this bond

c)Calculate the convexity for this bond d)What do you observe about your results? Assume an annual coupon payment frequency for your calculations. Explain your answer clearly.

Question Table 1 shows the current market prices for two zero-coupon government bonds. The par value for both bonds is €100. Use the information in table 1 to calculate the one-year, one-year forward rate. Table 1. Zero-coupon bond prices and implied spot rates. Explain your answer clearly.

Question Consider a 30-year US Treasury bond with a 2.25% coupon rate and a par value of $100. The coupon payment frequency is semi-annual. This bond is priced at $97.2238 and has a 2.38% yield, a duration of 21.6 and a convexity of 589. Use a Taylor series approximation to estimate the per cent change in the price of this bond when a) the yield is increased by 100 basis points to 3.38% b) the yield is reduced by 100 basis points to 1.38% c) What do you observe about your results in a) and b)? Explain your answers clearly.