workshop_week6_q5_q6_Solved.xls

# workshop_week6_q5_q6_Solved.xls - 5 Bond X is a premium...

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5. Bond X is a premium bond making annual payments. The bon Bond Y is a discount bond making annual payments. This bond p What are the prices of these bonds today? If interest rates remai In three years? In eight years? In twelve, thirteen years? What is Illustrate your answers by graphing bond prices versus time to m Coupon rate Coupon Face Value 8.00% 80 1000 8.00% 80 1000 X 8.00% 80 1000 8.00% 80 1000 8.00% 80 1000 8.00% 80 1000 8.00% 80 1000 8.00% 80 1000 8.00% 80 1000 8.00% 80 1000 8.00% 80 1000 8.00% 80 1000 8.00% 80 1000 8.00% 80 1000 Coupon rate Coupon Face Value 6.00% 60 1000 6.00% 60 1000 Y 6.00% 60 1000 6.00% 60 1000 6.00% 60 1000 6.00% 60 1000 6.00% 60 1000 6.00% 60 1000 6.00% 60 1000 6.00% 60 1000 6.00% 60 1000 6.00% 60 1000

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6.00% 60 1000 6.00% 60 1000
nd pays 8% coupon, has YTM of 6% and has 13 years to maturity. pays a 6% coupon, has a YTM of 8% and also has 13 years to maturity. in unchanged, what do you expect the prices of these bonds to be in one y s going on here? maturity. Time to maturity Y-t-m Price 13 6.00% £1,177.05 12 6.00% £1,167.68 11 6.00% £1,157.74 10 6.00% £1,147.20 9 6.00% £1,136.03 8 6.00% £1,124.20 7 6.00% £1,111.65 6 6.00% £1,098.35 5 6.00% £1,084.25 4 6.00% £1,069.30 3 6.00% £1,053.46 2 6.00% £1,036.67 1 6.00% £1,018.87 0 6.00% £1,000.00 Time to maturity Y-t-m Price 13 8.00% £841.92 12 8.00% £849.28 11 8.00% £857.22 10 8.00% £865.80 9 8.00% £875.06 8 8.00% £885.07 7 8.00% £895.87 6 8.00% £907.54 5 8.00% £920.15 4 8.00% £933.76 3 8.00%

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• Spring '16
• talib

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