i need help with part B please. A government bond with 2 years until maturity has a face value of £120,000 and an annual nominal coupon rate of 1%. Assume that the relevant nominal market interest rate (annualized) is equal to 5%. The coupon payments are made every 6 months. (a) Calculate the present value of the bond. (b) Assume the individual coupons are stripped from the bond and sold separately as zero coupon bonds. Calculate the market value of these zero coupon bonds. Assume there are no further changes to the market rate. How would you expect the price of the bond to evolve?
i need help with part B please. A government bond with 2 years until maturity has a face value of £120,000 and an annual nominal coupon rate of 1%. Assume that the relevant nominal market interest rate (annualized) is equal to 5%. The coupon payments are made every 6 months. (a) Calculate the present value of the bond. (b) Assume the individual coupons are stripped from the bond and sold separately as zero coupon bonds. Calculate the market value of these zero coupon bonds. Assume there are no further changes to the market rate. How would you expect the price of the bond to evolve?
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 9P
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i need help with part B please.
A government bond with 2 years until maturity has a face value of £120,000 and an
annual nominal coupon rate of 1%. Assume that the relevant nominal market interest
rate (annualized) is equal to 5%. The coupon payments are made every 6 months.
(a) Calculate the present
(b) Assume the individual coupons are stripped from the bond and sold
separately as zero coupon bonds. Calculate the market value of these zero coupon
bonds. Assume there are no further changes to the market rate. How would you
expect the price of the bond to evolve?
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