Extend the coupon stripping model to allow for up to twenty periods and calculate the profit or loss on this scenario. The model (see Figure 6.8)

requires the use of dates rather than a fixed number of periods together with IF statements to cease the coupon payments after 31 December 2013 and trigger the principal repayment.

The rates to be applied to each of the periods are as follows:

Figure 6.9 shows a portion of the answers with the individual coupons discounted at the individual rate and added together to form a profit.

Transcribed Image Text:

Figure 6.8 Coupon Rate % 10.00 Redemption Value 100.00 Price 102.00 Settlement Date 30-Jun-06 Maturity Date 31-Dec-13 Coupons pa 2 Yield % 9.88 Period Exercise inputs 2 3 Jun-06 Dec-06 Bond Cash Flows (2:00) Som 102.001 PV Factor PV Cash Flow (102,00) Sum of Cash Flows Price (NPV) at S.0% Yield Jun-07 Dec-07 Jun-08 Dec-00 Jun-09 Dec-09 Jun-10 Individual Yield 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 PV Factor 1.0000 PV Cash Flow (102.00) PV Capital Som (102