In a given securities market, an investment at time t=0 of £95 generates a return of £105 at time t=2 years. However, an investment of £95 at time t=2 (which is agreed from the outset) generates a return of £108 at time t=5 years. Given that the 5-year par yield is 5.3%, calculate, to two decimal places, the current price of a 5-year bond of £10,000 nominal paying coupons at a rate of 4.5% per annum and redeemed at 95%.
In a given securities market, an investment at time t=0 of £95 generates a return of £105 at time t=2 years. However, an investment of £95 at time t=2 (which is agreed from the outset) generates a return of £108 at time t=5 years. Given that the 5-year par yield is 5.3%, calculate, to two decimal places, the current price of a 5-year bond of £10,000 nominal paying coupons at a rate of 4.5% per annum and redeemed at 95%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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In a given securities market, an investment at time t=0 of £95 generates a return of £105 at time t=2 years. However, an investment of £95 at time t=2 (which is agreed from the outset) generates a return of £108 at time t=5 years.
Given that the 5-year par yield is 5.3%, calculate, to two decimal places, the current price of a 5-year bond of £10,000 nominal paying coupons at a rate of 4.5% per annum and redeemed at 95%.
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