BCOR 2200 Spring 2009 Project 2 Answers

BCOR 2200 Spring 2009 Project 2 Answers - The Green Cells...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: The Green Cells are Input Cells. The Orange Cells are Out put Cells. For each calculat or, place t he correct form ula in t he Orange Out put Cell t o calculat e t he correct value for a m ont hly m ort gage loan. Use t he dat a in quest ions 1 t hrough 3 t o fill in t he green cells. Loan Size Calculator Years APR Monthly Payment Loan size Payment Calculator Years APR Loan Size Monthly Payment 30 6.00% $300,000.00 $1,798.65 15 4.25% $600.00 $79,757.71 The Green Cells are Input Cells. The Orange Cells are Out put Cells. For each calculat or, place t he correct form ula in t he Orange Out put Cell t o calculat e t he correct v alue for a sem i annual bond. Use t he dat a in quest ions 4 t hrough 6 t o fill in t he green cells. Bond Price Calculator Years to Maturity Yield to Maturity Coupon Rate Face Value Price Bond Coupon Rate Calculator Years to Maturity Yield to Maturity Face Value Price Coupon Rate Bond YTM Calculator Years to Maturity Coupon Rate Face Value Price Yield to Maturity APR Calculator Years Monthly Payment Loan Size APR 3 $40.00 $1,000.00 25.45% 1. What size mortgage can be paid off at $600 per month for 15 years at 4.25% APR? 2. What are the monthly payments for a 30 year, 6.00%, $300,000 mortgage? 3. What is the APR of a 3 year, $1,000 loan with $40 payments? 4. What is the price of a 20 year 7.00% semi-annual coupon $1,000 bond with YTM of 6.50%? 5. What is the coupon rate of a 9 year, $5,000, semi-annual bond priced at $5,550 with a YTM of 4.50%? 6. What is the YTM of a 14 year, 4.75% semi-annual coupon, $1,000 bond priced at 95.82% of par? Total Points (Do not change this box) Questions 1 - 6 Questions 7 - 15 Chart and Questions 16 - 22 24 36 40 100 Cells are Input Cells. e Cells are Out put Cells. The Green Cells are Input Cells. The Orange Cells are Out put Cells. alculat or, place t he correct t he Orange Out put Cell t o he correct value for a sem ind. Use t he dat a in 4 t hrough 6 t o fill in t he s. For each set of rows, place t he correct form u t he Green Input cells t o dem onst rat e t he Int fact or bet ween t he t wo sem i-annual bonds. green cells. ond Price Calculator 20 10.00% 7.00% $1,000.00 $742.61 Coupon Rate Calculator 9 4.50% $5,000.00 $5,550.00 6.00% Term 20 20 15 15 11 11 Coup Rate 10.00% 7.00% 9.50% 4.25% 6.75% 6.75% Bond YTM Calculator 14 4.75% $1,000.00 $958.20 5.17% What is the percent change in price for a 100 bps de 7. An 18 year, 8% Semi-Annual Coupon bond with a 8. A 9 year, 8% Semi-Annual Coupon bond with a s 9. Does a longer or shorter maturity bond have grea What is the percent change in price for a 100 bps de 10. A 15 year, 9.5% Semi-Annual Coupon bond with 11. A 15 year, 4.25% Semi-Annual Coupon bond wi 12. Does a higher or lower coupon bond have great $79,757.71 $1,798.65 25.45% $742.61 6.00% 5.17% 4 4 4 4 4 4 What is the percent change in price for a 100 bps de 13. An 11 year, 6.75% Semi-Annual Coupon bond w 14. An 11 year, 6.75% Semi-Annual Coupon bond w 15. Does a higher or lower starting yield have greate YTM of 6.50%? 550 with a YTM of 4.50%? ed at 95.82% of par? s are Input Cells. ls are Out put Cells. rows, place t he correct form ulas in t he Orange Out put Cell s and ent er values in t cells t o dem onst rat e t he Int erest Rat e Risk associat ed w it h t he specific bond t he t wo sem i-annual bonds. Use t he dat a in quest ions 7 t hrough 15 t o fill in t he YTM 7.00% 7.00% 8.00% 8.00% 9.00% 5.34% FV $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 Price at initial YTM $1,320.33 $1,000.00 $1,129.69 $675.77 $844.93 $1,116.16 New Price at YTM -1% $1,462.30 $1,115.57 $1,229.90 $747.11 $909.68 $1,209.03 % Change in Price for YTM -1% 10.75% Use these two Rows to answer questions 7, 8 and 9 11.56% 8.87% Use these two Rows to answer questions 10, 11 and 12 10.56% 7.66% Use these two Rows to answer questions 13, 14 and 15 8.32% t change in price for a 100 bps decrease in rates for: Semi-Annual Coupon bond with a starting yield of 9%? emi-Annual Coupon bond with a starting yield of 9%? or shorter maturity bond have greater interest rate risk? 10.75% 11.56% Longer 4 4 4 t change in price for a 100 bps decrease in rates for: % Semi-Annual Coupon bond with a starting yield of 8%? 5% Semi-Annual Coupon bond with a starting yield of 8%? or lower coupon bond have greater interest rate risk? 8.87% 10.56% Lower 4 4 4 t change in price for a 100 bps decrease in rates for: 75% Semi-Annual Coupon bond with a starting yield of 9%? 75% Semi-Annual Coupon bond with a starting yield of 5.34%? or lower starting yield have greater interest rate risk? 7.66% 8.32% Lower 4 4 4 Creat e a t able and a graph showing t he relat ionship bet ween price a $1,000 face value bond and a 5 year, 10% sem i-annual coupon, $1,0 sim ilar t he Figure 6.2 on page 167 in t he t ext . ) Aft er finishing t he t able, highlight t he YTM and PRICE cells (T11 t hro Insert t hen select ing a Scat t er chart . Your chart should have YTM on Use these two Rows to answer questions 7, 8 and 9 Use these two Rows to answer questions 10, 11 and 12 Use these two Rows to answer questions 13, 14 and 15 YTM 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 20 Year $1,627.57 $1,462.30 $1,320.33 $1,197.93 $1,092.01 $1,000.00 $919.77 $849.54 $787.82 $733.37 $685.14 $642.26 $603.99 $569.71 $538.87 $511.05 5 Year $1,218.80 $1,170.60 $1,124.75 $1,081.11 $1,039.56 $1,000.00 $962.31 $926.40 $892.17 $859.53 $828.40 $798.70 $770.35 $743.29 $717.45 $692.77 $1,800.00 $1,600.00 $1,400.00 $1,200.00 $1,000.00 $800.00 $600.00 $400.00 $200.00 $0.00 4% P ( 6% 16. Which bond's price-yield relationship has the steeper slope? 17. What does the slope of the measure? 18. Now look only at the line for the twenty-year bond. Is the slope steeper at higher or lower YTMs? What does this mean? Consider Mutual funds A, B, C and D. Bond A is a twenty-year bond with a 10% coupon and 7% YTM. (The require Bond B is a twenty-year bonds with a 10% coupon and 18% YTM. (The requ Bond C is a five-year bonds with a 10% coupon and 7% YTM. (The required Bond D is a twenty-year bonds with a 7% coupon and 7% YTM. (The require Considering only changes in interest rates: 19. It is your belief that interest rates will decrease in the short-term. Would you prefer bond A or B? 20. It is your belief that interest rates will decrease in the short-term. Would you prefer bond A or C? 21. It is your belief that interest rates will decrease in the short-term. Would you prefer bond A or D? 22. Five years ago, the US Treasury issued a 10-year bond with a 4.00% coupo A few weeks ago, the US Treasury issued a 5-year bond with a 1.75% coup Which bond would you expect to have the higher yield to maturity? Why? at ionship bet ween price and yield for a 20 year, 10% sem i-annual coupon, sem i-annual coupon, $1,000 face value bond. (You are producing a graph xt . ) and PRICE cells (T11 t hrough V27) and creat e a " Scat t er" chart by select ing chart should have YTM on t he horizont al axis and Price on t he vert ical axis. $1,800.00 $1,600.00 $1,400.00 $1,200.00 $1,000.00 $800.00 $600.00 $400.00 $200.00 $0.00 4% Place your Chart (aka Graph) Here It is okay if it does not exactly fit this space. 6% 8% 10% 12% 14% 16% 18% 20% 20 Ye 5 Yea teeper slope? ond. Is the slope steeper at The 20 year bond has steeper slope (and greater interest rate risk) Slope measures interest rate risk Steeper at lower YTMs. Higher interest rate risk at lower yields. n and 7% YTM. (The required retrun for this issuer decreased since the bond was issued.) on and 18% YTM. (The required return for this issuer increased since the bond was issued.) and 7% YTM. (The required return for this issuer decreased since the bond was issued.) n and 7% YTM. (The required return for this issuer has remained the same since the bond was issued.) in the short-term. Bond A since it has a lower starting yield and therefore higher interestest rate risk. in the short-term. Bond A since it has a longer matruity and therefore higher interestest rate risk. Bond D since it has a lower coupon rate and therefore higher interestest rate risk. in the short-term. ear bond with a 4.00% coupon. year bond with a 1.75% coupon. her yield to maturity? Why? The new five-year bond should have the higher YTM since it has a lowe coupon and therefore higher interest rate risk. rt ere 18% 20% 20 Year 5 Year 22% 12 rate risk) 4 4 4 yields. her interestest rate risk. 4 interestest rate risk. 4 4 her interestest rate risk. e it has a lowe coupon and 4 ...
View Full Document

This note was uploaded on 10/08/2009 for the course BCOR 2200 taught by Professor Tomnelson during the Spring '08 term at Colorado.

Ask a homework question - tutors are online