On 1.1.2015 an investor purchases 500 nominal of a 5-year index-linked bond which pays base coupons...
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On 1.1.2015 an investor purchases €500 nominal of a 5-year index-linked bond which pays base coupons of €6 p.a. per €100 nominal of bond stock held, half-yearly in arrears, and is redeemed after 5 years at a base par level. Annual coupon and redemption payments on the bond are indexed with with respect to the inflation index Q(t) as shown below subject to a 6-month time lag applying. Suppose that the investor pays a price P for the €500 nominal of the bond stock so as to obtain an annual real yield of i p.a. Time 1.1.2014 1.7.2014 1.1.2015 Qt 123 125 130 1.7.2015 1.1.2016 1.7.2016 1.1.2017 1.7.2017 1.1.2018 1.7.2018 1.1.2019 1.7.2019 128 135 134 138 140 142 145 150 152 1.1.2020 155 4. Open Excel and build a spreadsheet of this transaction as shown below. Confirm that the investor should pay a price P = €557.01 so as to obtain an annual real yield of i= 4% p.a. On 1.1.2015 an investor purchases €500 nominal of a 5-year index-linked bond which pays base coupons of €6 p.a. per €100 nominal of bond stock held, half-yearly in arrears, and is redeemed after 5 years at a base par level. Annual coupon and redemption payments on the bond are indexed with with respect to the inflation index Q(t) as shown below subject to a 6-month time lag applying. Suppose that the investor pays a price P for the €500 nominal of the bond stock so as to obtain an annual real yield of i p.a. Time 1.1.2014 1.7.2014 1.1.2015 Qt 123 125 130 1.7.2015 1.1.2016 1.7.2016 1.1.2017 1.7.2017 1.1.2018 1.7.2018 1.1.2019 1.7.2019 128 135 134 138 140 142 145 150 152 1.1.2020 155 4. Open Excel and build a spreadsheet of this transaction as shown below. Confirm that the investor should pay a price P = €557.01 so as to obtain an annual real yield of i= 4% p.a.
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