You have decided to evaluate the following bonds to include in your portfolio: Bond 3 7/15/2020...

 

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You have decided to evaluate the following bonds to include in your portfolio: Bond 3 7/15/2020 9/15/2050 Settlement Date Maturity Date Frequency Face Value Coupon Rate Required Return Bond 1 Bond 2 3/15/2020 9/1/2020 1/15/2030 7/1/2040 Call Premium % Call Date 4 2 $1,000 $1,000 6.00% 8.00% 5.00% 10.00% a) Determine the invoice (dirty) price using the PV function on the prior coupon date and compounding that PV forward, the accrued interest, and the quoted (clean) price of each bond. Find the quoted price as the difference between the invoice price minus the accrued interest and verify this result using the PRICE function. Also calculate the current yield. b) Determine the yield to call on these bonds if the time to first call and the call premium for each one of them are the following: Bond 1 2 $1,000 10.00% 11.00% 2.00% 7/15/2023 Bond 2 3.00% 9/1/2024 | 1/15/2025 Bond 3 4.00% c) Determine the duration and modified duration of these bonds. d) Create a scatterplot for Bond 2 that shows required return on the x-axis and bond price on the y-axis. Plot the actual bond price using the price function and the duration approximate price. Use a range of 6% to 14% for the x-axis. You have decided to evaluate the following bonds to include in your portfolio: Bond 3 7/15/2020 9/15/2050 Settlement Date Maturity Date Frequency Face Value Coupon Rate Required Return Bond 1 Bond 2 3/15/2020 9/1/2020 1/15/2030 7/1/2040 Call Premium % Call Date 4 2 $1,000 $1,000 6.00% 8.00% 5.00% 10.00% a) Determine the invoice (dirty) price using the PV function on the prior coupon date and compounding that PV forward, the accrued interest, and the quoted (clean) price of each bond. Find the quoted price as the difference between the invoice price minus the accrued interest and verify this result using the PRICE function. Also calculate the current yield. b) Determine the yield to call on these bonds if the time to first call and the call premium for each one of them are the following: Bond 1 2 $1,000 10.00% 11.00% 2.00% 7/15/2023 Bond 2 3.00% 9/1/2024 | 1/15/2025 Bond 3 4.00% c) Determine the duration and modified duration of these bonds. d) Create a scatterplot for Bond 2 that shows required return on the x-axis and bond price on the y-axis. Plot the actual bond price using the price function and the duration approximate price. Use a range of 6% to 14% for the x-axis.

Answer rating: 100% (QA)

a Bond 1 Settlement date 3152020 Maturity date 1152030 Frequency 2 Coupon rate 6 Required return 5 I... View the full answer