Question: please use Excel to solve Problem # 2: Excel's Solver utility can also nd an optimum solution involving more than one variable. We will use
please use Excel to solve

Problem # 2: Excel's Solver utility can also nd an optimum solution involving more than one variable. We will use Solver to nd the best t of a straight line yield curve for some bond prices (more information on Solver is available in the previous assignment, or in the online tutorial). You are to calibrate a straight line yield curve where W) = yo + mt by nding appropriate values for yo and m. The value y(t) is the semiannually compounding bond yield, or IRR, for a bond of maturity t. The yield curve is to be the best straight-line t for the following four bonds: Bond 1 has face value $100 and a term of 1 year with semiannual coupons of 5% and a price of $100.01. Bond 2 has face value $100 and a term of 1.5 year with semiannual coupons of 7% and a price of $101.31. Bond 3 has face value $100 and a term of 2 year with a semiannual coupon of 8% and a price of $103.03. Bond 4 has face value $100 and a term of 5 year with a semiannual coupon of 3% and a price of $82.36. Create a spreadsheet with headings similar to the following: A A B C D E F G H I J L L i y_0 m L at (rate change) i i Term Face Coupon FrequenLy vield Model price Market price Difference squared L 1 $100 ? 1 =y_o + m ' B7
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