week 2 - Ex interest = x <= 7, entire amount of interest...

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Week 2 Tutorial Emily Lo
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House Keeping [email protected] Consultation: Mon 12-1 (ASB323) Assessment Details AssessmentTasks Weighting Adaptive Tutorial 1% Tutorial Participation 4% (2% to attendance, 2% to participation) Online Quiz 2% each ( week 2-12) In Class Quizzes 5% each (week 4, 9, 12) first 15mins Assignment 5% (Due in week 8) Form groups by week 4
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Timeline of Cash Flows Price of Bond = PV of Coupon + PV of Face Value CPP = coupon interest per 6 mth period r= YTM/2 t= no. of periods receiving coupons Valuation/Transaction Date Settlement Date P 0 C C C C+FaceValue Maturity Date + 2 working days P 0 CPP 1 (1 r ) t r FaceValue (1 r ) t
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Pricing Bond with Fractional Periods to maturity Cum interest = x > 7, entire amount of interest is included in the price of bond
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Unformatted text preview: Ex interest = x <= 7, entire amount of interest is excluded f= x/y Cum interest bond = P = (P’ + CPP)/(1+ r) f Ex interest bond =P = P’ /(1+ r) f P’ P Settlement date Next coupon payment date Previous coupon payment date f 1-f X days Ydays Quoted Prices Ex-interest impact >> fall in bond price due to the exclusion of interest on next coupon payment date when bond becomes ex-interest Quoted Price >> price quoted in the market and any changes is solely due to changes in yield or time, not because of ex-interest impact >> Cum interest bond = accrued interest is removed P adj =P-CPP(1-f) >> Ex-interest bond= accrued interest is added back P adj =P +CPP(f)...
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This note was uploaded on 01/10/2012 for the course FINS 3616 taught by Professor Curry during the Three '10 term at University of New South Wales.

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week 2 - Ex interest = x <= 7, entire amount of interest...

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