Bond Market Interest

QUESTION 1

Coupon Value = 10% x 100 = $10

B0 = 19.41560938 + 96.11687812

B0 = $115.5324875

QUESTION 2

2a)

B0 = 19.55883424 + 97.0661749

B0 = $116.6250091

2b) 0.4717075% increase in the bond price during a two years period when the required yield on the bond falls by 50 basis points

QUESTION 3

3a)

B0 = 19.27424152 + 95.1814396

B0 = 114.4556811

3b) = - 0.4671098% decrease in the bond price during a two years period when the required yield on the bond falls by 25 basis points

QUESTION 4

1)

B0 = 163.5143334 + 67.2971333

B0 = = 230.8114667

2a) 0.3178023% increase in the bond price during a twenty years period when the required yield on the bond falls by 50 basis points

3a)

B0 = 155.8916229 + 61.02709429

B0 = $216.9187172

3b) = -0.3099113% decrease in the bond price during a twenty years period when the required yield on the bond falls by 25 basis points

QUESTION 5

Coupon Value = 3% x $100 = $3

YTM = 2% i.e. 0.02

1)

B0 = 5.824682814 + 96.11687812

B0 = $101.9415609

2a)

B0 = 5.867502720 + 74.2470418

B0 = $102.9336776

2b) 0.4854323% increase in the bond price during a two years period when the required yield on the bond falls by 25 basis points

3a)

B0 = 5.782272456 + 95.1814396

B0 = $100.9637121

3b) -0.4807681% decrease in the bond price during a two years period when the required yield on the bond raises by 25 basis points

4.1)

B0 = 49.05430003 + 67.2971333

B0 = $116.3514333

4.2a)

B0 = 51.50591636 + 74.2470418

B0 = $125.7529582

4.2b) 0.3892763% increase in the bond price during a twenty years period when the required yield on the bond falls by 25 basis points

4.3a)

B0 = 46.76748686 + 61.02790943

B0 = $107.7953963

4.3b) -0.3811730% decrease in the bond price during a two years period when the required yield on the bond raises by 25 basis points

QUESTION 6

A) Looking the figures in question 1 to 5, there is an increase during a 2 and the 20 years time period as a result...