Chapter_6_Extra_Problems_solution_2

Chapter_6_Extra_Problems_solution_2 - Chapter 6 Extra...

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Chapter 6 Extra Problems #1. AA bond - Coupon rate : 6% coupon payment = 1000*0.06 = 60 YEARLY COUPON PMTS But the bond pays semi-annually so, PMT = 60/2 = 30 - 10 yr bond - Seminannual pmts P/Y = 2 10 yr Treasuries - Coupon rate : 5% - Selling at par this tells us that the current mkt rate for the Treasuries = COUPON RATE - The spread for 10 yr securities is 90 basis points the current mkt rate that 10yr securities should use is Therefore, set P/Y = 2 FV = 1000 N = 10*2 = 20 PMT = 1000*0.06 /2 = 30 I/Y = YTM that Nakfoor faces = 5.9% (….Nakfoor YTM = Treasury + spread) CPT PV = 1007.47
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#2. Quote = 109.74% Coupon rate = 8% 6 yrs till maturity 30 days passed / semi-annual coupon payments 1) Clean price = quoted price = $1000 * 1.0974 = $1097.40 2) Coupon payment per period = 1000 * 0.08 / 2 = $40 In coupon period, there are 365/2 days = 182.50 days 3) Accrued interest =
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#3. Coupon rate = 8%
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This note was uploaded on 01/29/2012 for the course FI 311 taught by Professor Booth during the Summer '06 term at Michigan State University.

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Chapter_6_Extra_Problems_solution_2 - Chapter 6 Extra...

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