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Solutions to in-calss exercises_Chapter 6

# Solutions to in-calss exercises_Chapter 6 - rate forward...

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1 Solution to in-class exercise 1   Answer B The YTM on this bond is 6.0431%; the YTFC  on this bond is 5.7256%; the YTFPC on this  bond is 5.6072%; and the YTP (yield to put) on  this bond is 5.8016%. So the yield to worst on  this bond is its YTFPC, which is 5.6072%.

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2 Solution to in-class exercise 2 % 6171 . 2 1 ) 167 . 90 \$ 6 . 102 \$ ( z 167 . 90 \$ 6 . 102 \$ ) z 1 ( ) z 1 ( 6 . 102 \$ ) 3561 . 2 4318 . 2 4961 . 2 549 . 2 100 \$( ) z 1 ( 6 . 102 \$ 3561 . 2 \$ 4318 . 2 \$ 4961 . 2 \$ 549 . 2 \$ ) z 1 ( 6 . 102 \$ 024927 . 1 6 . 2 \$ 022548 . 1 6 . 2 \$ 0206 . 1 6 . 2 \$ 02 . 1 6 . 2 \$ 100 \$ 5 1 5 5 5 5 5 5 5 5 5 4 3 2 1 = - = = + + = - - - - + + + + + = + + + + + = So on a bond-equivalent basis the 2.5 year  Treasury spot rate is 2.6171%  ×  2 = 5.2342%
3 Solution to in-class exercise 3

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Unformatted text preview: rate forward the basis BEY a On 1) 1 % 9144 . 10 2 % 4572 . 5 % 4572 . 5 1 ) 042 . 1 ( ) 0425 . 1 ( 1 ) z 1 ( ) z 1 ( f 24 25 24 24 25 25 24 = × ∴ =-+ + =-+ + = 4 Solution to in-class exercise 3 % 2 . 9 2 % 6 . 4 %. 6 . 4 1 ] ) 05 . 1 ( ) 0301518 . 1 [( z ) z 1 ( ) 05 . 1 ( ) 0301518 . 1 ( ) z 1 ( ) z 1 ( ) f 1 ( 1 ] ) z 1 ( ) z 1 ( [ f ) 2 10 1 8 2 10 10 10 8 2 10 10 8 8 2 8 2 2 1 8 8 10 10 8 2 = × ⇒ =-+ × + = ∴ + = + × + ∴ + = + × + ⇒-+ + = is rate spot Treasury year -5 the basis BEY a On...
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