A6 Answer Basic Bond Problem

A6 Answer Basic Bond Problem - 113:28 113:29-75 3.833 N =...

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A6 Bond Problem Assignment a) Define the three terms for expressing bond yield: current yield = C/P ; coupon rate = C/F & yield to maturity = C/P + capital gain at maturity b) Rank them from largest to smallest for the market rate greater than the coupon rate. If coupon rate < market rate, then P < F as bond will sell at a discount. Therefore ytm > current yield > coupon rate Given the price determine the asked y-t-m for the following three types of Treasuries: [Data Date 9-9-2010] a. Coupon bond Maturity Coupon Bid Asked Chg Asked yield 2040 Feb 15 4.625
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Unformatted text preview: 113:28 113:29 -75 __ 3.833 __ N = 29 + 159/365 = 29.436 * 2; PV = -113 + 29/32 = 113.906; FV = 100; pmt = 4.625/2 = 2.313; i = 3.833 b. T-bill ydb = (F-P)/F *360/dtm; ytm = (F-P)/P*365/dtm dtm = 175 Maturity Bid Asked Chg Asked yield 2011 Mar 03 0.180 0.175 +0.005 _ .1775 ____ .00175 = ((100- P)/100) * 360/175 => P = 99.915 Ytm = ((100-99.915)/99.915) / 365/175 => ytm = .1775 c. Zero Data on Treasury Strips Maturity Bid Asked Chg Asked yield 2040 Feb 15 30.957 3 30.967 unch. _ 4.022 _ n = 29.436; PV = -30.967; FV = 100 => i = 4.022...
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