On a job interview, you were handed the following quotes on U.S. Treasuries: Bond 1 2...
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On a job interview, you were handed the following quotes on U.S. Treasuries: Bond 1 2 3 Maturity (Years) 1 2 3 Coupon Rates 5% 5% 0% Yield to Maturity 4.5% 5% 5.5% Assume that the par value is $100 and coupons are paid annually, with the first coupon payment coming in exactly one year from now. The yield to maturity is also quoted as an annual rate. You are then asked the following questions: 1. What should be the price of a bond with a maturity of 3 years and coupon rate of 5%, given the above information? 2. What should be the 1-year forward rate between years 2 and 3? 3. What is the modified duration of a bond portfolio with 30% invested in bond 1 and 70% invested in bond 3? 4. How much would the value of the portfolio in (c) change if the yields of all bonds increased by 0.15%? On a job interview, you were handed the following quotes on U.S. Treasuries: Bond 1 2 3 Maturity (Years) 1 2 3 Coupon Rates 5% 5% 0% Yield to Maturity 4.5% 5% 5.5% Assume that the par value is $100 and coupons are paid annually, with the first coupon payment coming in exactly one year from now. The yield to maturity is also quoted as an annual rate. You are then asked the following questions: 1. What should be the price of a bond with a maturity of 3 years and coupon rate of 5%, given the above information? 2. What should be the 1-year forward rate between years 2 and 3? 3. What is the modified duration of a bond portfolio with 30% invested in bond 1 and 70% invested in bond 3? 4. How much would the value of the portfolio in (c) change if the yields of all bonds increased by 0.15%?
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Step 11 1 The price of a bond with a maturity of 3 years and coupon rate of 5 would be calc... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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