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  • Daniel Gomez Fin 4500 Ch3 (p3) Homework Maturity (Years) Spot Rate (%)

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    Danny Gomez
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    The document contains sample spot rate curves and questions about calculating bond prices and yields from the given spot rates. It asks to: 1) Calculate the price of a 2-year, 4% coupon corporate bond using a spot rate curve. 2) Find the yield to maturity (YTM) of that bond. 3) Calculate the price of a 3-year, 5% coupon corporate bond trading at a 225bps spread over the spot rates. It also asks to calculate several 1-year and 2-year forward rates from a second sample spot rate curve.

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    FIN4500 HOMEWORK 2

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    The document contains sample spot rate curves and questions about calculating bond prices and yields from the given spot rates. It asks to: 1) Calculate the price of a 2-year, 4% coupon corporate bond using a spot rate curve. 2) Find the yield to maturity (YTM) of that bond. 3) Calculate the price of a 3-year, 5% coupon corporate bond trading at a 225bps spread over the spot rates. It also asks to calculate several 1-year and 2-year forward rates from a second sample spot rate curve.

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    11 views2 pages

    Daniel Gomez Fin 4500 Ch3 (p3) Homework Maturity (Years) Spot Rate (%)

    Uploaded by

    Danny Gomez
    The document contains sample spot rate curves and questions about calculating bond prices and yields from the given spot rates. It asks to: 1) Calculate the price of a 2-year, 4% coupon corporate bond using a spot rate curve. 2) Find the yield to maturity (YTM) of that bond. 3) Calculate the price of a 3-year, 5% coupon corporate bond trading at a 225bps spread over the spot rates. It also asks to calculate several 1-year and 2-year forward rates from a second sample spot rate curve.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    Daniel Gomez

    Fin 4500 Ch3 (p3) homework

    Maturity
    Spot Rate (%)
    (years)
    1.0 1.00
    2.0 3.00
    3.0 5.00
    4.0 5.00

    1. Consider the following benchmark spot curve with annual compounding:

    A) Use the spot rates to calculate the arbitrage-free price of a 4% coupon, 2-year bond from a
    similar credit quality issuer?

    B) What is its YTM of the bond above?

    10%

    C) A corporate bond offers a 5% coupon with exactly 3-years to maturity. If it is trading at a 225bps
    z-spread, what is its price?
    2. Consider the following spot curve with annual compounding:

    Maturity
    Spot Rate (%)
    (years)
    1.0 3.00
    2.0 3.25
    3.0 3.60
    4.0 3.90

    a. What is the 1-year forward rate, 1-year from today (𝑓 )? 1,1

    b. What is the 1-year forward rate, 2-years from today (𝑓 2,1)?

    c. What is the 2-year forward rate, 1-year from today (𝑓 )? 1,2

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