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Unformatted text preview: at t=0 at t=1 TTM Rate TTM Rate DFt 1 2.14% 0.979048365 1 2.3900% 0.9766579 2 2.45% 0.9527436755 2 2.7000% 0.9481108 3 2.75% 0.9218377914 3 3.0000% 0.9151417 4 2.98% 0.8891774701 4 3.2300% 0.8805952 5 3.21% 0.8538687309 4.5966760328 3.7205055 Given Coupon Rate 3.250% M $1,000 PV(Coupons) $149.39 PV(Coupons) $120.92 PV(M) $853.87 PV(M) $880.60 $1,003.26 $1,001.51 25 basis points hpr 3.0651% DF t DF t DF t P P 1 At t=1, the TS undergoes an upward parallel shift of 2. The yield to maturity on a 27year 10.35% annual coupon bond is 16.65%. (a) Explain why, or why not, would this bond sell at a discount. Because C/M is less than y, the YTM, the bond will sell at a discount. Given: YTM= 16.65% M= $1,000 C/M= 10.35% and n= 27 years. We can work out C= $103.50 and P= $627.54 Yield to Maturity: Time Cash Flows We confirm YTM Check reinvestment income calculations (NOT a part of Hwk) $(627.54) 16.65000% Coupon # RI on Coupon # 1 $103.50 YTM calcns imply that: 1 $5,571.21 2 $103.50 time 27 wealth $40,135.43 $40,135....
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This note was uploaded on 02/12/2012 for the course UGBA 101A taught by Professor Mccullough during the Spring '08 term at University of California, Berkeley.
 Spring '08
 MCCULLOUGH

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