bond pricing

calculate the bond settlement price when yield to maturity is 5.2%via excel

FINN238 Math for Risk Management Take Home Exercise 2 - Bonds Assessment: This homework is worth 6% of your final grade. Due date: Wednesday 18th May 2016 by 3pm Format: Please submit a hard copy with the answers and send your Excel file via Ritaj. Save the file under as your full name followed by your student ID (for example Bayan_Arqawi_12345678.xls). Assume today is 11th August 2005 and you wish to purchase a 6% February 2017 CGB with the yield to maturity being quoted as 5.2%. i) Calculate the bond's settlement price when the yield to maturity is 5.2%. ii) Assume that you purchase the bond and sell it two years later at an YTM of 6%. Assume that you were able to reinvest all the coupons received at 6% compounded semi-annually. Compute the holding period return of your investment. iii) Assume that you purchase this bond and sell it two years later at an YTM of 5.2%. Assume that you were able to reinvest all the coupons received at 5.2% p.a. compounded semi-annually. Compute the holding period return of your investment. iv) Extend Table A in worksheet \"MacDur\" of the DURATION.xls file to find the bond's duration. Assume that (a) the yield curve is currently flat at 5.2%, (b) you purchase the bond and hold it for a period equal to its duration, (c) the yield curve shifts upwards by the same across all maturities to 6% soon after your purchase and you are able to reinvest all coupon interests, and sell the bond, at 6% p.a. compounded semi-annually, and (d) the selling price is the present value of all the remaining cash flows paid by the issuer with no consideration for cum-interest, ex-interest, nor adjustments for accrued interest. Compute the holding period return of your investment. v) Assume that (a) the yield curve is currently flat at 5.2%, (b) you purchase the bond and hold it for a period equal to its duration, (c) the yield curve changes shape soon after your purchase so that the yield is 6% for maturities of 2 years and less, 7% for maturities between 2 and 3 years, and 8% for maturities of more than 3 years, and (d) the selling price is the present value of all the remaining cash flows paid by the issuer with no consideration for cum-interest, ex-interest, nor adjustments for accrued interest. Compute the holding period return of your investment. vi) Compare the holding period returns obtained in parts (ii) to (v) to the initial yield at the time when you purchased the bond. Under what scenarios are you able to earn the approximately same return as the initial YTM? Why