Solutions to chapter 3

Solutions to chapter 3 - Problem n.1 Topic: Zero-coupon...

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Problem n.1 Topic: Zero-coupon bond Face Value (FV) 1,000 Maturity (n.years) 5 YTM 6% Present value (PV) 747.26 PV FV /(1 i ) n Problem n.3 Topic: Coupon bond Coupon rate 7% FV 1,000 Years to maturity YTM Current price Coupon rate Coupon Bond 3 5% 1,054.5 70 1 3 7% 1,000.0 2 6 7% 1,000.0 3 9 5% 1,142.2 4 9 9% 880.1 5
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Problem n.4 Topic: 8 year 10% coupon bond FV 1000 Coupon rate 10% Current price 1150 Maturity 8 0 -1150 1 100 2 100 3 100 4 100 5 100 6 100 7 100 8 1100 YTM 7.44% Problem n.6 Topic: Perpetuity Coupon 50 YTM 2.50% Price 2000 Price 1000 Problem n.8 Topic: Real vs Nominal interest rate Deposited amount of money 1000 Real interest rate 2% Expected inflation 6% Nominal interest rate 8% 2% 6% 8%. Future value 1080 Price of the stereo t0 1050 Price of the stereo t1 1113 You will be short by: -33
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Problem n.9 Topic: 10 year 7% coupon bond FV 1000 Coupon rate 7% Maturity (n. years) 10 Price t0 871.65 Price t1 880.1 0 -871.65 € 871.6 1 70 € 880.1 2 70 3 70 4 70 5 70 6 70 7 70 8 70 9 70 10 1070 YTM 9% Current yield 8.0% Rate of capital gain 1.0% Rate of return 9.0% 1 70 880.10 871.65 0.09, or 9%.
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This note was uploaded on 10/12/2011 for the course BIEMF 30006 taught by Professor Ippolito during the Fall '10 term at Università Bocconi.

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Solutions to chapter 3 - Problem n.1 Topic: Zero-coupon...

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