Solution - TW Finance - CHAPTER 11 Solution to Question 1...

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CHAPTER 11 Solution to Question 1 BOND 1 BOND 2 Settlement Date: 1/1/2000 1/1/2000 Maturity Date: 1/1/2015 1/1/2020 Coupon Rate: 0.05 0.08 YTM: 0.08 0.06 Face Value (% of par): 100 100 Coupons per year: 1 1 Price(% of par): 74.32 117.20 Formula:=PRICE(B3,B4,B5,B6,B7,B8) The first bond has the lower price because there is invesrse relationship between the YTM and the price of the b In case of the first bond, the yield of the bond is more than the coupon rate and thus the market price is lower th par value and vice versa. Solution to Question 2 Settlement Date: 1/1/2000 Maturity Date: 1/1/2015 Coupon Rate: 0.08 YTM: 0.09 Face Value (% of par): 100 Coupons per year: 1 Price(% of par): 87.91 Therefore the price of the bond is 879.09 Solution to Question 3 HPR = [I + (Po - P1)] / Po where I = Interest Payment P1 = Price after one year Po = Purchase Price here I 100 Po 900 P1 950 HPR =(100+(900-950))/900 5.56% These area ssum of years in wh
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Solution to Question 4 BOND 1 BOND 2 Settlement Date:
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Solution - TW Finance - CHAPTER 11 Solution to Question 1...

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