Ana_Bairac 210626 n - Number Coupon Maturity 1 2 3 0 7 3 Price 2 10 20 98.00 135.00 101.00 a Compute the yields to maturity and the modified durations

Ana_Bairac 210626 n - Number Coupon Maturity 1 2 3 0 7 3...

This preview shows page 1 - 3 out of 11 pages.

Number Coupon Maturity Price 1 0 2 98.00% 2 7 10 135.00% 3 3 20 101.00% a) Compute the yields to maturity and the modified durations of each bond: Bond 1 Bond 2 Price 98.00% Price 135.00% coupon 0% coupon 7% yield 1.015263% yield 2.91476% time Cash Flow PV duration mod dur time Cash Flow 0 -98.0 0 1 1 7 2 100 97.9999843 1.99999968 1.9798985118 2 7 0.0 3 7 4 7 5 7 6 7 7 7 8 7 9 7 10 107 b) Find the Nominal values of bond 1 and 3 for a perfect duration hedge (total market value of your position is price coupon yield duration mod dur bond 1 98 0 1.0153% 1.9999996798 1.979899 bond 2 135 7 2.9148% 7.896 7.672 bond 3 101 3 2.9332% 15.3508035146 14.91336 yield change price change bond 1 1.00% -1.98% bond 2 1.00% -7.67% bond 3 1.00% -14.91% Portfolio position value yield change value change bond 1 -61701 -60467.2007 2.00% 2394.3784124064 bond 2 80000 108000 2.00% -16571.858 bond 3 -47062 -47532.7993 2.00% 14177.4796328007 0.0 0.00 total market value is zero c) Estimate the total effect on the portfolio position at a 0.9% drop in all bonds yields
Portfolio position value new yield cha value change bond 1 -61701.2252 -60467.2007 -0.90% -1077.4702855829 bond 2 80000 108000 -0.90% 7457.336 bond 3 -47062.1776 -47532.7993 -0.90% -6379.8658347603 0.0 0.00 euro change in position Here you must use Solver, and put the first sum , cell "C54" as a target for 0, and at the conditions t Then the changing cells will be B51 and B53, as nominal values of the Bond 1 and 3.

You've reached the end of your free preview.

Want to read all 11 pages?

• Fall '10
• Bart Vinck
• Forward contract, James Bond, From Russia with Love, Sean Connery, Thunderball