Question
1. Assume that the following bond yields, compounded semiannu- ally: 6-month Treasury Strip: 3.00%; 1-year Treasury Strip: 3.50%; 18-month Treasury Strip: 4.00%. (a) What is
1. Assume that the following bond yields, compounded semiannu- ally:
6-month Treasury Strip: 3.00%; 1-year Treasury Strip: 3.50%; 18-month Treasury Strip: 4.00%.
(a) What is the 6-month forward rate in six months?
(b) What is the price of a semiannual 10% coupon Treasury bond that matures in exactly 18 months?
(c) The yield to maturity of this bond is 3.97%. What is the $Du- ration, $Modified Duration, Macaulay Duration, and $Convexity of this bond?
(d) Approximate the absolute profit and loss of this bond if the yield to maturity increase by 100 basis point using your answers to the last question? (Dont calculate the new price and keep two digits in your answer)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started