Calculate the Macaulay durations of the Caltech century bonds, the 30-Year T-Bond, and the 30- Year...
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Calculate the Macaulay durations of the Caltech century bonds, the 30-Year T-Bond, and the 30- Year Zero. In part (i), assume that the Caltech bond yields 4.74%; and in part (ii), assume it yields 7.00%. [All bonds should have a price of $100 when the Caltech bond yields 4.74%. Note that the constant spread assumption implies the 30-year T-Bond will yield 2.98% and 5.24% in parts (i) and (ii), respectively. The flat yield curve assumption implies the 30-year T-Bond and 30-year Zero will always have the same yields.] Which of the three bonds has a duration that is closest to the duration of PIM's liabilities (40 years)? Calculate the Macaulay durations of the Caltech century bonds, the 30-Year T-Bond, and the 30- Year Zero. In part (i), assume that the Caltech bond yields 4.74%; and in part (ii), assume it yields 7.00%. [All bonds should have a price of $100 when the Caltech bond yields 4.74%. Note that the constant spread assumption implies the 30-year T-Bond will yield 2.98% and 5.24% in parts (i) and (ii), respectively. The flat yield curve assumption implies the 30-year T-Bond and 30-year Zero will always have the same yields.] Which of the three bonds has a duration that is closest to the duration of PIM's liabilities (40 years)?
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i Given Caltech bond yields 474 Caltech century bond price 100 Caltech century bond yield 474 30yea... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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