Question: ! Please show calculations without using excel, thanks in advance You must invest $ 1 0 0 , 0 0 0 , and the bonds
Please show calculations without using excel, thanks in advance
You must invest $ and the bonds listed below from A to E are the only
investments available today assume
that it is possible to buy a fraction of a bond in order to invest the full $ Assume all these bonds have the
same yieldtomaturity ; APR, compounded semiannually:
A A bond with years to maturity and a zero coupon rate discount bond
B A bond with years to maturity and a coupon rate coupons are paid semiannually
C A bond with years to maturity and a coupon rate coupons are paid annually
D A bond with years to maturity and a coupon rate coupons are paid semiannually
E A bond with years to maturity and a coupon rate coupons are paid semiannually
a Rank these bonds according to their interest rate sensitivities from the most interest rate sensitive to the least
interest rate sensitive
b If you want to profit from an unexpected decrease in market interest rates, which bond should you purchase?
c What is the duration of the bond you chose in part b
d If you are worried that market interest rates might increase unexpectedly, which bond should you purchase?
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