Duration_homework

# 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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## This note was uploaded on 08/06/2009 for the course BUSINESS 4444 taught by Professor Dr.dale during the Spring '09 term at University of Texas at Dallas, Richardson.

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

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