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fm3_problems25

fm3_problems25 - Exercise 1 A 1 2 3 4 5 6 7 8 9 10 11 12 13...

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Exercise 1 Page 1 Current date 21-May-07 Maturity, in years 21 Maturity date 21-May-27 YTM 15% Coupon 4% Face value 1,000 Duration 9.03982 #MACRO? Data table: Coupon and duration 9.04 #MACRO? 0% 20 1% 13.1 2% 10.84 3% 9.71 4% 9.04 5% 8.59 6% 8.27 7% 8.03 8% 7.85 9% 7.7 10% 7.58 11% 7.48 Raising the coupon lowers the duration. CHANGING THE COUPON RATE Effect on Duration 0% 2% 4% 6% 8% 10% 5 5.5 6 6.5 7 7.5 8 8.5 9 9.5 Effect of Coupon on Duration Maturity = 21, Yield to Maturity = 15.00% Coupon rate Duration A B C D E F 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33

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Exercise 1 Page 2 Graph title below: Effect of Coupon on Duration Maturity = 21, Yield to Maturity = 15.00% Reminder: Duration (settlement, maturity, coupon, yield, frequency, basis) 12% G H I J K L M N O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33
Exercise 2 Page 3 EFFECT OF MATURITY ON DURATION Current date 15-Jul-07 Maturity, in years 21 Maturity date 21-May-28 #MACRO? YTM 9% Coupon 4% Face value 1,000 Duration 12.09 #MACRO? Duration of consol 12.76 #MACRO?

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