Stat 109 Problem Set # 2
Due date: 22 October 2015, 8:30 am
1. Researchers have shown that cigarette smoking has a deteriorating eect on lung functions. In their
study of the eect of cigarette smoking on the carbon monoxide diusing capacity (DL) of the lu

Exercise 1: Sensitivity Analysis
9.11.2015
Bond with a principal of 1000 pesos and coupon payments of 40 pesos every 6 months.
Bond
Maturity
2
3
5
7
10
6%
1037.171
1054.172
1085.302
1112.961
1148.775
Yield to Maturity
7%
8%
9%
1018.365
1000
982.0624
1026

SENSITIVITY ANALYSIS: BOND PRICE AGAINST YIELD TO MATURITY
The price
B of a bond at a given yield to maturity
yc
(expressed with continuous
compounding) is
[ ]
n
B=
c e y t + P e y t where t i is the date of the i th cash flow, c is the coupon
c i
i=1
c n