Consider these 3 bonds: US Gov't Treasury Bond 2.375% due May 15, 2029 trading at...

 

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Consider these 3 bonds: • US Gov't Treasury Bond 2.375% due May 15, 2029 trading at a yield to maturity of 1.686%. Assume a settlement date of October 31, 2019. • US Gov't Treasury Strip due May 15, 2029 trading at a YTM of 1.791%. Assume a settlement date of October 31, 2019. • Motorola Solutions 4.60% due May 23, 2029 trading at a YTM of 3.389%. Assume a settlement date of October 31, 2019. a) (18 marks) Calculate each bond's Macaulay Duration, Modified Duration and the Convexity Measure. Note, you must calculate the full market price of each bond to arrive at the duration and convexity figures (do not back out accrued interest). Assume that for the US treasury bonds (a and b) the actual/actual day count convention applies. For the actual/actual day count convention use the actual days in the 6 month period for the denominator (for example: 181 days). For the bond c) assume the 30/360 day count convention. b) (2 marks) Which of the 3 bonds has the least sensitivity to interest changes? Please explain your findings. Consider these 3 bonds: • US Gov't Treasury Bond 2.375% due May 15, 2029 trading at a yield to maturity of 1.686%. Assume a settlement date of October 31, 2019. • US Gov't Treasury Strip due May 15, 2029 trading at a YTM of 1.791%. Assume a settlement date of October 31, 2019. • Motorola Solutions 4.60% due May 23, 2029 trading at a YTM of 3.389%. Assume a settlement date of October 31, 2019. a) (18 marks) Calculate each bond's Macaulay Duration, Modified Duration and the Convexity Measure. Note, you must calculate the full market price of each bond to arrive at the duration and convexity figures (do not back out accrued interest). Assume that for the US treasury bonds (a and b) the actual/actual day count convention applies. For the actual/actual day count convention use the actual days in the 6 month period for the denominator (for example: 181 days). For the bond c) assume the 30/360 day count convention. b) (2 marks) Which of the 3 bonds has the least sensitivity to interest changes? Please explain your findings.

Answer rating: 100% (QA)

aUS Gov t Treasury Bond 2 375 due May 15 20 29 Full market price 1 000 C oup on payments 23 75 First coupon payment 23 75 x 181 360 13 229 Last coupon ... View the full answer