MA373 F15 Homework Chapter 8

MA373 F15 Homework Chapter 8 - Chapter 8 Use the following...

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October 27, 2015 Chapter 8 Use the following spot yield curve for Problems 1-5: Time Spot Rate ½ 1.0% 1 1.5% 1 ½ 2.0% 2 2.5% 2 ½ 3.0% 3 4.0% 3 ½ 5.0% 4 6.0% 1. Calculate the price of a 2 year bond with a par value of 10,000. The bond matures for par and has a coupon rate of 6% convertible semi-annually. 2. Calculate the present value of a four year annuity due with annual payments of 5000. 3. Two years from today, Rinat will receive 100,000. Three years from today, Rinat will receive 200,000. How much will Rinat have four years from today? 4. Calculate the accumulated value of a 3 year annuity immediate with annual payments of 1000. 5. A four year bond matures for 5000 and has annual coupons of 125. The price of the bond is calculated using the spot yield curve. Determine the annual yield rate on the bond.

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Unformatted text preview: October 27, 2015 6. You are given the following yield curve: Term (t) Spot Rate 1 0.060 2 0.065 3 0.069 4 0.072 Calculate the 1 year deferred 3 year forward rate f (1,4) . 7. You are given the following two bonds: Term Annual Coupon Maturity Value Price 1 60 1000 1000.00 2 80 1000 1055.06 Calculate the 2 year spot interest rate. 8. You are given the following spot yield curve: t t r 1 4.0% 2 3.5% 3 3 r 4 4 r The present value of a four year annuity due of 100 is 379.05. The price of a 4 year bond with a maturity value of 2000 and annual coupons of 50 is 1875.12. Calculate the three year deferred one year forward interest rate. October 27, 2015 Answers 1. 10,688.99 2. 19,130.16 3. 344,631.86 4. 3178.90 5. 5.88% 6. 7.603% 7. 5.0% 8. 5.77%...
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