Question
Consider the following three bonds with semi-annual coupon frequency and $1000 face value. Bond Price Coupon rate (%) Term to maturity F 884.20 7 5
Consider the following three bonds with semi-annual coupon frequency and $1000 face value.
Bond Price Coupon rate (%) Term to maturity
F 884.20 7 5
G 948.90 8 7
H 967.70 9 4
For each of the three bonds: a. Draw a timeline and indicate the payoffs. b. Compute the (annualized) yield to maturity. c. Calculate the current yield. d. Consider a portfolio composed by 2/3 of F bonds and 1/3 of G bonds. Calculate the price and the yield to maturity of the portfolio. e. Consider a portfolio composed by 2/3 of F bonds and 1/3 of H bonds. Is it easier to determine the yield to maturity in this case?
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