SolA5 - SOLUTION FOR ASSIGNMENT 5(1 Solution 0.1(6.7.2 Let...

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SOLUTION FOR ASSIGNMENT 5 (1) Solution 0.1. (6.7.2) Let y be the new yield for each coupon period, so we have (1 + y ) 1 / 2 { 30 a 7 | y + 1065(1 + y ) 7 } = 995 one can solve above equation by solving the following equation: (1 + 0 . 5 y ) { 30 a 7 | y + 1065(1 + y ) 7 } = 995 or equivalently, 0 . 5 × { 30 a 7 | y + 1065(1 + y ) 7 } + 0 . 5 × { 30¨ a 7 | y + 1065(1 + y ) 6 } = 995 Using financial calculator, we have y = 0 . 042489 . For the accrued interest by theoratical method is 1000 × 0 . 06 2 (1 + y ) 0 . 5 - 1 y = 14 . 84 . If using practical method, 30 / 2 = 15 (2) Solution 0.2. (6.7.4) First, using the basic formula, we can find the book value at time 6: 60984 . 56503 = 4960 a 4 | 0 . 085 + 62000 × 1 . 085 - 4 So the interest due at time eighty month (at time 6 2 3 ) is 60984 . 56503 × (1 . 085 2 / 3 - 1) = 3408 . 60 by theoratical method, the accrued interest is 4960 × 1 . 085 2 / 3 - 1 0 . 085 = 3261 . 51 by practical method, it is 4960 × 2 / 3 = 3306 . 67 using theoratical method, the split of the payment is interestdue = 3408 . 60 pricipal = 3261 . 51 - 3408 . 60 = - 147 . 09 (3) 1
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2 SOLUTION FOR ASSIGNMENT 5 Solution 0.3. (6.8.2) The yield rate for each month y meets the condition (1 + y ) 4 = 1 . 07 so y = 0 . 0170583 . The price paid for the bond is P = 25 a 48 | 0 . 0170583 + 1000 v 12 = 1258 . 8363 Since the actual reinvest rate is 1% quarterly, so the accumulation value at time 12 is 25 s 12 | 0 . 01 + 1000 = 2530 . 565194 if i is the actual effective rate, then 2530 . 565194 = 1258 . 8363(1 +
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This note was uploaded on 11/21/2011 for the course MATH ACTSC 231 taught by Professor Zhou during the Spring '10 term at Waterloo.

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SolA5 - SOLUTION FOR ASSIGNMENT 5(1 Solution 0.1(6.7.2 Let...

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