Question
5. Bond E: 12% CouponCompounded Semiannually $100 FACE Value Yield 10% 28 years until maturity Holding period 12 years a. What is the original price
5. Bond E: 12% CouponCompounded Semiannually $100 FACE Value Yield 10% 28 years until maturity Holding period 12 years
a. What is the original price of the bond?
b. Quantify the price and reinvestment risks for the holder of the bond if rates increase 1%.
c. Quantify the net risk for the increasing rate scenario.
d. Find the average annual holding period return under the scenario of interest rates increasing immediately and assuming any cash-flows received can be reinvest at the new interest rate.
| Yield Increase | Yield Decrease | |||
| Expected | Actual | Expected | Actual | |
| Coupon/period ($) | ||||
| Maturity (periods) | ||||
| Yield/period | ||||
| Holding period | ||||
| Price | ||||
| Reinvestment | ||||
| HPR(total) | ||||
| HPR(effective, annual) | ||||
| HPR(BEY) | ||||
| Price (0) |
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Numerical Methods In Finance
Authors: René Carmona, Pierre Del Moral, Peng Hu, Nadia Oudjane
2012th Edition
3642257453, 978-3642257452
