20_ANSWERS - 3-year bond coupon rate 4 yield 3.5 compute the price Estimate the price using duration n r N y P D 3 4.00 1 3.50 unknown unknown exact

20_ANSWERS - 3-year bond coupon rate 4 yield 3.5 compute...

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3-year bond, coupon rate 4%, yield 3.5%, compute the price? Estimate the price using duration n 3 r 4.00% N 1 y 3.50% P unknown exact computation t cashflow D unknown 0 1 0.04 2 0.04 3 1.04 approximate computation with 3 years to go and at a yield o its duration can then be computed t cashflow 0 1 0.04 2 0.04 3 1.04 the approximate price is given by In your portfolio you have €10.000 nominal in 2-year bonds, coupon 4.25%, and €10.000 nom from 4.95% to 4.85%. Using duration, estimate the change in value of your portfolio. First n 2 r 4.25% N 10,000.00 y 4.05% price or P unknown t cashflow value duration D unknown 0 10,037.69 1.96 new yield 4.15% 1 425.00 408.46 0.04 2 10,425.00 9,629.24 1.92 Second n 4 r 4.75% N 10,000.00 y 4.95% price or P unknown t cashflow value duration D unknown 0 9,929.00 3.73 new yield 4.85% 1 475.00 452.60 0.05 2 475.00 431.25 0.09 3 475.00 410.91 0.12 4 10,475.00 8,634.24 3.48
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price 101.40% 0.039 0.037 0.938 of 4%, a 4% bond has a price of 100% d from weight duration 100.00% 2.8861 0.038 0.0385 0.037 0.0740 0.925 2.7737 1-duration / (1+yield) * yield differential i.e. 101.39% quite close to the exact price minal in 4-year bonds, coupon 4.75%. The 2-year ytm goes from 4.05% to 4.15%, the 4-year ytm estimated value change -18.90 estimated value change 35.34 total value change 16.43
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m goes
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Q. 04 Suppose someone promises you JPY 12.500 in sixteen months time in return for the JPY 12 the compounded one, or the simple one? t 0.00 -12,175.00 1.33 12,500.00 1.976% continuous return 1.995% compound return 2.002% simple return
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2.175 you give him today. Which rate of return implied in this transaction is highest: the contin
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nuously one,
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Q. 05 What is worth most to you if you require a compound rate of return of 3% on a sixmonth return 3% per sixmonthly period t in sixmonthly periods cash flow present value 0 1000 1000 2 1060 999.1517 3.5 1115 1005.413 so the 1115 in 21 months is worth most
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hly basis: EUR 1.000 now, EUR 1.060 in one year time or EUR 1.115 in 21 months time?
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Q. 06 Suppose you require a continuous rate of return of 4% on a yearly basis. Someone borro him the money? return 4% t cash flow present value 0 -1,200.00 -1,200.00 3.0031 1,350.00 1,200.00 0.0000 sum of present values must be set to zero by changing time of seco
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ows USD 1.200 from you and is prepared to pay you back as much as USD 1.350. How long wi ond cashflow
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ill you lend
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Q. 07 What is your compound rate of return if in exchange for a sum of GBP 18.500 invested toda return 2.644% t cash flow present value 0 -18,500.00 -18,500.00 2 10,000.00 9,491.38 4 10,000.00 9,008.62 0.000000 sum of present values must be set to zero by changing return
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ay you will receive GBP 10.000 in two years time and GBP 10.000 in four years time?
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Q. 08 Someone lends you ZAR 100.000 today in return for which you are supposed to pay back ZA replace the two payments of ZAR 60.000 and ZAR 65.000 by a single – equivalent – payment of ZA return (continuous or compounded)? Compound case return 15.552% t cash flow present value 0 100,000.00 100,000.00 0.25 -60,000.00 -57,870.51 3 -65,000.00 -42,129.49 0.00 sum of present values must be set to zero by changing return replace this by t cash flow present value 0 100,000.00 100,000.00 1.261335 -120,000.00 -100,000.00 0.00000 sum of present values must be set to zero by changing time of seco Continuous case return 14.455% t cash flow present value 0 100,000.00 100,000.00 0.25 -60,000.00 -57,870.51 3 -65,000.00 -42,129.49 0.00 sum of present values must be set to zero by changing return replace this by t cash flow present value 0 100,000.00 100,000.00 1.261335 -120,000.00 -100,000.00 0.00000 sum of present values must be set to zero by changing time of seco
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AR 60.000 in three months time and another ZAR 65.000 in three years time. Suppose you wan AR 120.000. When do you have to pay this single sum? Does your answer depend on the way y ond cashflow ond cashflow: EXACTLY the SAME!
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nt to you compute rates of
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Q. 09 You will lend someone HKD 45.800 five months from now in return for which he is suppose
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