Duration_homework - BA 4346 Duration homework 1 XYZ bonds...

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BA 4346 Duration homework 1. XYZ bonds just paid their annual coupon. They have a 5 percent coupon rate and mature in 5 years. They sell for 97.865% of par value. a. Calculate the yield to maturity of the bond using a calculator. i. 5.5% b. Calculate the duration of the bond two ways: i. Using a calculator. ii. Using a spreadsheet that you will turn in with your homework 1 Period Cash  Flow PV t*PV 0  $  (978.65) ($978.65) $0.00  1  $  50.00  $47.39  $47.39  2  $  50.00  $44.92  $89.85  3  $  50.00  $42.58  $127.74  4  $  50.00  $40.36  $161.44  5  $  1,050.00  $803.39  $4,016.9 5.50% $978.65  $4,443.3 Duration 4.5403220 7 2. Consider also JKL bonds, which just paid their annual coupon, have a 4% coupon rate, mature in 4 years, and have a yield to maturity of 5.4%. What is the price of the JKL bonds as a percentage of par? 2 66.975% =PV(0.054,4,40,-1000)/ 1000 Period Cash  Flow PV t*PV 0 ($950.81) ($950.81) $0.00  1  $  $37.95  $37.95 
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40.00  2  $  40.00  $36.01  $72.01  3  $  40.00  $34.16  $102.48  4  $  1,040.00  $842.70  $3,370.7 5.40% $950.81  $3,583.2 Duration 3.76859184 3 3. If you own both XYZ and JKL, what would be the combined duration of the two bonds, using the single security approach?
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