Using the yield curve in Table 3.6, compute the dollar duration for the following securities: [Hint: You may need to calculate the current price and dollar duration (= P DP) for each bond. Portfolio dollar duration is D_W^$=_(i=1)^nN_i D_i^$ , where N_i is the number of units of security i, D_i^$ is the dollar duration of security i.] (b) short a 7-year zero coupon bond (f) short a 1 1/4-year floating rate bond with 50 basis point spread, paid semiannually. Assume that the coupon applying to the next reset date has been set at r2(0.25, 0.25) = 6.4%.

[3.6 Exercise 4.] Using the yield curve in Table 3.6, compute the dollar duration for the following securities: [Hint: You may need to calculate the current price and dollar duration (= P Dp) for each bond. Portfolio dollar duration is D` = ?=1N_D, where N; is the number of units of security in D is the dollar duration of security i.] (b) short a 7-year zero coupon bond (f) short a 1 1/4-year floating rate bond with 50 basis point spread, paid semiannually. Assume that the coupon applying to the next reset date has been set at r2(-0.25, 0.25) = 6.4%. Maturity 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 2.25 2.50 Table 3.6 Yield Curve on March 15, 2000 Yield Maturity Yield Maturity 6.33% 2.75 6.86% 5.25 6.49% 3.00 6.83% 5.50 6.62% 3.25 6.80% 5.75 6.71% 3.50 6.76% 6.00 6.79% 3.75 6.72% 6.25 6.84% 4.00 6.67% 6.50 6.87% 4.25 6.62% 6.75 6.88% 4.50 6.57% 7.00 6.89% 4.75 6.51% 7.25 6.88% 5.00 6.45% 7.50 Yield 6.39% 6.31% 6.24% 6.15% 6.05% 5.94% 5.81% 5.67% 5.50% 5.31% [3.6 Exercise 4.] Using the yield curve in Table 3.6, compute the dollar duration for the following securities: [Hint: You may need to calculate the current price and dollar duration (= P Dp) for each bond. Portfolio dollar duration is D` = ?=1N_D, where N; is the number of units of security in D is the dollar duration of security i.] (b) short a 7-year zero coupon bond (f) short a 1 1/4-year floating rate bond with 50 basis point spread, paid semiannually. Assume that the coupon applying to the next reset date has been set at r2(-0.25, 0.25) = 6.4%. Maturity 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 2.25 2.50 Table 3.6 Yield Curve on March 15, 2000 Yield Maturity Yield Maturity 6.33% 2.75 6.86% 5.25 6.49% 3.00 6.83% 5.50 6.62% 3.25 6.80% 5.75 6.71% 3.50 6.76% 6.00 6.79% 3.75 6.72% 6.25 6.84% 4.00 6.67% 6.50 6.87% 4.25 6.62% 6.75 6.88% 4.50 6.57% 7.00 6.89% 4.75 6.51% 7.25 6.88% 5.00 6.45% 7.50 Yield 6.39% 6.31% 6.24% 6.15% 6.05% 5.94% 5.81% 5.67% 5.50% 5.31%