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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+(900950))/900
5.56%
These area ssum
of years in wh
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View Full DocumentSolution to Question 4
BOND 1
BOND 2
Settlement Date:
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 Spring '10
 Ravikant

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