Suppose a three (3) years bond has coupon rate of 10%, the required rate of return...
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Suppose a three (3) years bond has coupon rate of 10%, the required rate of return (YTM) is 8%. a. What is the bond price? (2 marks) b. Calculate the Macaulay's duration by fill-in the table below! (10 marks) A B D E F Duration C 1 Period Year Cash Flow (CF) Present value (PV) of CF Weight Coupon payment 2345 1234 21 0.5 1 4 3 1.5 2 2.5 6 3 6 879 8 56 لي = CF1/(1 + i)¹ = CF2/(1 + i)² = CF3/(1 + i)³ = CF4/(1 + i)¹ =CF5/(1+i)5 = CF6/(1 + i) =sum = cell D2/D8=cell E2*C2 = cell D3/D8=cell E3*C3 = cell D4/D8=cell E4*C4 = cell D5/D8=cell E5*C5 = cell D6/D8-cell E6*C6 = cell D7/D8-cell E7*C7 =sum =sum Suppose a three (3) years bond has coupon rate of 10%, the required rate of return (YTM) is 8%. a. What is the bond price? (2 marks) b. Calculate the Macaulay's duration by fill-in the table below! (10 marks) A B D E F Duration C 1 Period Year Cash Flow (CF) Present value (PV) of CF Weight Coupon payment 2345 1234 21 0.5 1 4 3 1.5 2 2.5 6 3 6 879 8 56 لي = CF1/(1 + i)¹ = CF2/(1 + i)² = CF3/(1 + i)³ = CF4/(1 + i)¹ =CF5/(1+i)5 = CF6/(1 + i) =sum = cell D2/D8=cell E2*C2 = cell D3/D8=cell E3*C3 = cell D4/D8=cell E4*C4 = cell D5/D8=cell E5*C5 = cell D6/D8-cell E6*C6 = cell D7/D8-cell E7*C7 =sum =sum
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SOLUTION Bond price and duration formula 1 2 3 4 567 8 9 10 11 A B Per... View the full answer
Related Book For
Federal Taxation 2016 Comprehensive
ISBN: 9780134104379
29th edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson
Posted Date:
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