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  • Fixed Income - In-Class Exercise Problem 1

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    Arbi Ahmetaj
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    1) The document provides details on bond valuation including the facial value, coupon rate, days held, and quoted price. 2) It then calculates the yield to maturity using continuous and semi-annual compounding, showing the cash flows and discount factors. 3) The yield to maturity is calculated to be -0.4836% under continuous compounding and -0.4830% under semi-annual compounding, with a negligible difference between the two methods.

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    Fixed Income - In-Class Exercise Problem 1.xlsx

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    1) The document provides details on bond valuation including the facial value, coupon rate, days held, and quoted price. 2) It then calculates the yield to maturity using continuous and semi-annual compounding, showing the cash flows and discount factors. 3) The yield to maturity is calculated to be -0.4836% under continuous compounding and -0.4830% under semi-annual compounding, with a negligible difference between the two methods.

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    © All Rights Reserved
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    9 views2 pages

    Fixed Income - In-Class Exercise Problem 1

    Uploaded by

    Arbi Ahmetaj
    1) The document provides details on bond valuation including the facial value, coupon rate, days held, and quoted price. 2) It then calculates the yield to maturity using continuous and semi-annual compounding, showing the cash flows and discount factors. 3) The yield to maturity is calculated to be -0.4836% under continuous compounding and -0.4830% under semi-annual compounding, with a negligible difference between the two methods.

    Copyright:

    © All Rights Reserved
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    Flag for inappropriate content
    of 2

    Problem 1

    Question 1
    Facial value 50
    Coupon rate 2.14%
    Days held 73
    Convention days 360
    Semi-annual, n 2
    Quoted at 115.44%

    Invoice price = Dirty price = quoted price + accrued interest


    Price 57.9370

    Question 2
    1) yield to maturity (continuous compounding)

    date 0 t T1 T2 T3 T4 T5
    0 0.2027778 0.5 1 1.5 2 2.5
    y -0.4836%
    Z(t,T_i) 1.001 1.004 1.006 1.009 1.011
    CF 0.535 0.535 0.535 0.535 0.535
    CF x Z(t,Ti) 0.536 0.537 0.538 0.540 0.541
    Price discount 57.937
    diff 0.0000

    2) yield to maturity (n-compounding --> 2-compunding)

    date 0 t T1 T2 T3 T4 T5
    0 0.2027778 0.5 1 1.5 2 2.5
    y -0.4830%
    Z(t,T_i) 1.001 1.004 1.006 1.009 1.011
    CF 0.535 0.535 0.535 0.535 0.535
    CF x Z(t,Ti) 0.536 0.537 0.538 0.540 0.541
    Price discount 57.937
    diff 0.000
    blem 1
    stion 1

    stion 2

    T6 T7 T8 T9 T10 T11 T12


    3 3.5 4 4.5 5 5.5 6

    1.014 1.016 1.019 1.021 1.023 1.026 1.028


    0.535 0.535 0.535 0.535 0.535 0.535 50.535
    0.542 0.544 0.545 0.546 0.548 0.549 51.972

    T6 T7 T8 T9 T10 T11 T12


    3 3.5 4 4.5 5 5.5 6

    1.014 1.016 1.019 1.021 1.023 1.026 1.028


    0.535 0.535 0.535 0.535 0.535 0.535 50.535
    0.542 0.544 0.545 0.546 0.548 0.549 51.972

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