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HW02 (1) - from(b 4 Create an Excel spreadsheet that can...

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IE471/FEP311 Introduction to Financial Engineering Homework Assignment 02 Due: Mar 3, 2010 (Wed) 1. A debt of $10,000 should be paid monthly over the next 10 years at 10% interest. (a) Find the periodic payments. (b) What is the annual worth? 2. Calculate the prices of the following bonds. You need to show your work. (a) 10% coupon bond with 10% yield? (b) 5% coupon bond with 5% yield? (c) x% coupon bond with x% yield? (d) Bond with the following cash flow stream 3. Consider a 30-year, 8% bond that is trading at a yield of 10%. The coupons are paid twice a year. (a) Find the price (b) Find the duration and the modified duration (c) Suppose the yield has gone up by 1%. Can you guess the current bond price using the information
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Unformatted text preview: from (b)? 4. Create an Excel spreadsheet that can calculate the price and the duration of a bond with maturity m, coupon rate C, face value F, and yield to maturity λ . - You need to specify 4 input cells (m, C, F and λ ) - Create two output cells that calculate the price and the duration respectively. - Submit the Excel file to the Moodle website – click “upload a file” link in the assignment 03 section 5. Derive equation (3.3) in the textbook. 6. You are obligated to pay $10,000 in a year. There are two bonds with the following information The yields for both bonds are 6%. Construct a portfolio of bonds A and B using the immunization technique....
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