IFA test.xlsx - Coupon payment u00a9 = 5 x 100 Par value n...

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Coupon payment © = 5% x 100 5 Par value 100 n 5 r 7% Coupon payment 5 Bond price 91.80 Numerator 415.23 Duration of bond 4.52 Bond pricing model PMT = 5 r = 10% 10% n = 5 5/(1.10) + 5/(1.10)^2+5/(1.10)^3+5/1.10)^4+105/(1.10)^5 81.05 % price change = (81.05 - 91.80)/91.80 = -11.71% b iii) Modified duration = Macaulay duration / (1+YTM) = 4.52 + (1 + 0.07) = 4.22 % price change = - Mod duration x Yield change = -4.22 x 3% = -12.7% b i) Year Cash flow PV @ 7% PV of cash flow % of price 1 5 0.9346 4.6729 0.0509 2 5 0.8734 4.3672 0.0476 3 5 0.8163 4.0815 0.0445 4 5 0.7629 3.8145 0.0416 5 105 0.7130 74.8635 0.8155 91.7996 1.0000 b ii
Weight % of value 0.0509 0.0951 0.1334 0.1662 4.0776 4.52
Bond A Par value 100 Coupon payment n 10 = 100 x 0.03 r 5% 3 Coupon payment 3 Bond price 84.56 Numerator 732.03 Duration of bond 8.66 Year Cash flow PV @ 5% PV of cash flow % of price Weight % of value 1 3 0.9524 2.8571 3.38 0.0338 2 3 0.9070 2.7211 3.22 0.0644 3 3 0.8638 2.5915 3.06 0.0919 4 3 0.8227 2.4681 2.92 0.1168 5 3 0.7835 2.3506 2.78 0.1390 6 3 0.7462 2.2386 2.65 0.1589 7 3 0.7107 2.1320 2.52 0.1765 8 3 0.6768 2.0305 2.40 0.1921 9 3 0.6446 1.9338 2.29 0.2058 10 103 0.6139 63.2331 74.78 7.4782 84.5565 100.00 8.66 Duration = 8.66 years Bond b Year Cash flow PV @ 3% PV of cash flow % of price Weight % of value 0.5 1 0.9709 0.9709 1.09 0.01 1 1 0.9426 0.9426 1.06 0.01 1.5 1 0.9151 0.9151 1.03 0.02 2 1 0.8885 0.8885 1.00 0.02 2.5 1 0.8626 0.8626 0.97 0.02 3 101 0.8375 84.5859 94.86 2.85 89.1656 100.00 2.92 Duration = 2.92 years
Current yield = Annual coupon rate / current price bond Loan amount PV = 40 / 1034.47 interest rate I/Y = 0.0387 3.87 Period N Compunding periods per year PV = [40 x { 1 - 1.035^-8} / 0.035] + 1,000 / 1.035^8

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