Q.

1)
Coupon rate 8.5%
Start Date 1-Feb-09
End Date 1-Feb-20
Yield 3.2976%
Redemption 100

Price of the bond

147.67

PV -147.67

Coupon rate 8.5%

Start Date 1-Feb-09
End Date 1-Feb-20
Yield 4%
Redemption 100

Price of the bond

139.73

PV
-139.73

Q.2)
Coupon rate 3.50%
Start date 1-Feb-09
Maturity 1-Feb-18
Price 107.46875%
Redemption 1000
Price 1074.6875

YLD 1.6578

Rate 1.2827%

Coupon rate 3.50%

Start date 1-Feb-09
Maturity 1-Feb-18
Price 110%
Redemption 1000

YLD 1.6241

Rate Err:523

Q.3)
Coupon Rate 8.5
Start Date 1-Feb-09
End Date 1-Feb-20
Yield 3.2976%

Duration
5.5

Coupon Rate 8.5

Start Date 1-Feb-09
End Date 1-Feb-20
Yield 4%

Duration 5.4

As the yield increases, duration decreases as they inversely proportional. Bond prices are less sensitive to changes in interest r

Q.4)
Coupon Rate 8.5
Start Date 1-Feb-09
End Date 1-Feb-20
Yield 4%

Modified Duration 5.2951

Duration 5.4010
Modified Duration 529.5% 0.02 1.02

Coupon Rate 7.5

Start Date 1-Feb-09
End Date 1-Feb-20
Yield 4%

modified duration 5.30

duration 5.41
modified duration 5.30
ensitive to changes in interest rates compared to yield.
Q.1)
Project C0 C1 C2 C3
F -10,000 6,000 6,000 6,000

IRR 36%

Q.2)
C0 C1 C2 C3
-5,000 2,200 4,650 3,330

IRR 42%

Q.3)
C0 C1 C2 C3 C4 C5 C6
-215,000 0 0 0 185,000 85,000 43,000

IRR 9%