704_2004_Bonds_last_lecture

# 704_2004_Bonds_last_lecture - a) What is the total yield...

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purchased to yield 12% one year ago and sold today with the interest rate being 10%? 704 2004 Bonds last lect Maturity 4 4 6 Initial Yield 12% 12% 12% New yield 10% 10% 10% Coup Rate 8% 0% 12% Coupon 80 0 120 R878.51 R635.52 R1,000.00 Price at beg of year 1 at yield of 12% 0 -R878.51 -R635.52 -R1,000.00 1 R80.00 R0.00 R120.00 2 R80.00 R0.00 R120.00 3 R80.00 R0.00 R120.00 4 R1,080.00 R1,000.00 R120.00 5 R120.00 6 R1,120.00 0 -R950.26 -R751.31 -R1,075.82 Price at beg of year 1 at yield of 10% 1 R80.00 R0.00 R120.00 Note one less year to ma 2 R80.00 R0.00 R120.00 3 R1,080.00 R1,000.00 R120.00 4 R120.00 5 R1,120.00 0 -R878.51 -R635.52 -R1,000.00 -R2,514.02 Price at beg year 1 1 R1,030.26 R751.31 R1,195.82 R2,977.39 Price at end year 1 Plus 18.431% 2977.39 / 2514.02 - 1 a) What is the total yield for the following portfolio of government bonds i) 4-year, 8% annual coupon bond ii) 4-year, pure discount bond iii) 6-year, 12% annual coupon bond.

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ture.xls aturity coupon
Coupon Period Yield Call at Call after Price Yield 2 10% 3 1025 2 1020 5% =RATE(n,pmt,pv,fv,type) Current Yield 9.80% =Coupon*1000/Price Yield of Bond i) 9.21% = RATE( Period, Coupon*1000, -Price, 1000, 0) Price in absence of all when yield drops to 5% ii) R 1,047.62 =-PV(Yield2,Period, Coupon*1000, 1000,0) Yield to call iii) -1020 100 1125 10.0% a) A 3-year 12% annual coupon bond callable after 2 years for R1050, sells for R1040 i) Determine the yield to maturity ii) If the interest rates were to change to 5% after two years, determine the price of the bond without the call option. iii)

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## This note was uploaded on 05/13/2010 for the course FIN 704 taught by Professor Visser during the Fall '10 term at University of South Africa.

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704_2004_Bonds_last_lecture - a) What is the total yield...

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