The bond price using spread sheet.

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Answer 1

Question

Chapter 6, Problem 31QP

a)

Summary Introduction

To determine: The bond price using spread sheet.

b)

Summary Introduction

To determine: The yield to maturity of the bond.

Yield to maturity (YTM) is the overall return anticipated on a bond throughout its maturity period and it is considered as a long-term bond yield and represented as an annual rate.

c)

Summary Introduction

To discuss: By comparing the YTM of the 10-year, 10% coupon bond with that of a 10-year zero-coupon bond or treasury strip. Which is higher and the reason for the result making sense by yield curve.

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An insurance company has liabilities of £7 million due in 10 years' time and £9 million due in 17 years' time. The assets of the company consist of two zero-coupon bonds, one paying £X million in 7 years' time and the other paying £Y million in 20 years' time. The current interest rate is 6% per annum effective. Find the nominal value of X (i.e. the amount, IN MILLIONS, that bond X pays in 7 year's time) such that the first two conditions for Redington's theory of immunisation are satisfied. Express your answer to THREE DECIMAL PLACES.

An individual is investing in a market where spot rates and forward rates apply. In this market, if at time t=0 he agrees to invest £5.3 for two years, he will receive £7.4 at time t=2 years. Alternatively, if at time t=0 he agrees to invest £5.3 at time t=1 for either one year or two years, he will receive £7.5 or £7.3 at times t=2 and t=3, respectively. Calculate the price per £5,000 nominal that the individual should pay for a fixed-interest bond bearing annual interest of 6.6% and is redeemable after 3 years at 110%. State your answer at 2 decimal places.

The one-year forward rates of interest, f+, are given by: . fo = 5.06%, f₁ = 6.38%, and f2 = 5.73%. Calculate, to 4 decimal places (in percentages), the three-year par yield.

Answer 2

Question

Chapter 6, Problem 31QP

a)

Summary Introduction

To determine: The bond price using spread sheet.

b)

Summary Introduction

To determine: The yield to maturity of the bond.

Yield to maturity (YTM) is the overall return anticipated on a bond throughout its maturity period and it is considered as a long-term bond yield and represented as an annual rate.

c)

Summary Introduction

To discuss: By comparing the YTM of the 10-year, 10% coupon bond with that of a 10-year zero-coupon bond or treasury strip. Which is higher and the reason for the result making sense by yield curve.

Expert Solution & Answer

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Answer 3

Question

Chapter 6, Problem 31QP

a)

Summary Introduction

To determine: The bond price using spread sheet.

b)

Summary Introduction

To determine: The yield to maturity of the bond.

Yield to maturity (YTM) is the overall return anticipated on a bond throughout its maturity period and it is considered as a long-term bond yield and represented as an annual rate.

c)

Summary Introduction

To discuss: By comparing the YTM of the 10-year, 10% coupon bond with that of a 10-year zero-coupon bond or treasury strip. Which is higher and the reason for the result making sense by yield curve.

Expert Solution & Answer

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See solution

Answer 4

Question

Chapter 6, Problem 31QP

a)

Summary Introduction

To determine: The bond price using spread sheet.

b)

Summary Introduction

To determine: The yield to maturity of the bond.

Yield to maturity (YTM) is the overall return anticipated on a bond throughout its maturity period and it is considered as a long-term bond yield and represented as an annual rate.

c)

Summary Introduction

To discuss: By comparing the YTM of the 10-year, 10% coupon bond with that of a 10-year zero-coupon bond or treasury strip. Which is higher and the reason for the result making sense by yield curve.

Expert Solution & Answer

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Answer 5

Chapter 6, Problem 31QP

a)

Summary Introduction

To determine: The bond price using spread sheet.

b)

Summary Introduction

To determine: The yield to maturity of the bond.

Yield to maturity (YTM) is the overall return anticipated on a bond throughout its maturity period and it is considered as a long-term bond yield and represented as an annual rate.

c)

Summary Introduction

To discuss: By comparing the YTM of the 10-year, 10% coupon bond with that of a 10-year zero-coupon bond or treasury strip. Which is higher and the reason for the result making sense by yield curve.

Answer 6

Chapter 6, Problem 31QP

a)

Summary Introduction

To determine: The bond price using spread sheet.

Answer 7

Chapter 6, Problem 31QP

a)

Summary Introduction

To determine: The bond price using spread sheet.

Answer 8

b)

Summary Introduction

To determine: The yield to maturity of the bond.

Yield to maturity (YTM) is the overall return anticipated on a bond throughout its maturity period and it is considered as a long-term bond yield and represented as an annual rate.

Answer 9

b)

Summary Introduction

To determine: The yield to maturity of the bond.

Yield to maturity (YTM) is the overall return anticipated on a bond throughout its maturity period and it is considered as a long-term bond yield and represented as an annual rate.

Answer 10

c)

Summary Introduction

To discuss: By comparing the YTM of the 10-year, 10% coupon bond with that of a 10-year zero-coupon bond or treasury strip. Which is higher and the reason for the result making sense by yield curve.

Answer 11

c)

Summary Introduction

To discuss: By comparing the YTM of the 10-year, 10% coupon bond with that of a 10-year zero-coupon bond or treasury strip. Which is higher and the reason for the result making sense by yield curve.

Answer 12

Expert Solution & Answer

Answer 13

Expert Solution & Answer

Answer 14

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Answer 15

Ch. 6 - Prob. 1QP Ch. 6 - Bond Yields. A 30-year Treasury bond is issued...Ch. 6 - Prob. 3QP Ch. 6 - Bond Yields. A bond with face value $1,000 has a...Ch. 6 - Bond Pricing. A General Power bond carries a...Ch. 6 - Prob. 6QP Ch. 6 - Prob. 7QP Ch. 6 - Prob. 8QP Ch. 6 - Prob. 9QP Ch. 6 - Prob. 10QP

The bond price using spread sheet.

Concept explainers

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To determine: The bond price using spread sheet.

To determine: The yield to maturity of the bond.

Yield to maturity (YTM) is the overall return anticipated on a bond throughout its maturity period and it is considered as a long-term bond yield and represented as an annual rate.

To discuss: By comparing the YTM of the 10-year, 10% coupon bond with that of a 10-year zero-coupon bond or treasury strip. Which is higher and the reason for the result making sense by yield curve.

Want to see the full answer?

Chapter 6 Solutions

The bond price using spread sheet.

Concept explainers

Videos

To determine: The bond price using spread sheet.

To determine: The yield to maturity of the bond. Yield to maturity (YTM) is the overall return anticipated on a bond throughout its maturity period and it is considered as a long-term bond yield and represented as an annual rate.

To discuss: By comparing the YTM of the 10-year, 10% coupon bond with that of a 10-year zero-coupon bond or treasury strip. Which is higher and the reason for the result making sense by yield curve.

Want to see the full answer?

Chapter 6 Solutions

To determine: The yield to maturity of the bond.

Yield to maturity (YTM) is the overall return anticipated on a bond throughout its maturity period and it is considered as a long-term bond yield and represented as an annual rate.