Hi - looking to get help with the attached problem set. Thanks!

COR1-GB.2311 FOUNDATIONS OF FINANCE Spring 2017 Problem Set #4 This problem set is due in class on Monday, May 1. You may collaborate with your classmates in preparing the solutions, but each student must hand in a separate assignment. If you do receive help or work with another student on the assignment, you must note this fact at the beginning of your solutions. Please remember to put your name at the top of the first page. Also, please staple your assignment if there are multiple pages and put your name on every page. Assignments that are late but within 24 hours of the deadline, will receive credit. After 24 hours no assignments will be accepted! 1. Consider a 2-year, risk-free bond with a coupon rate of 6% (annual coupons) and a face amount of $1,000. a. What is price of this bond if the YTM is 5%? 6%? 7%? b. If you buy the bond for $1,000 (YTM = 6%), hold it to maturity and you reinvest the coupon payment at 5%, what is the annual HPR on your investment? c. If you buy the bond for $1,000 (YTM = 6%), then the yield increases to 7%, and you sell the bond immediately after the first coupon payment (in 1 year), what is your HPR? d. If the yield on the bond is 6% (P = $1,000), i. What is the Macaulay duration? ii. If the yield increases to 7% immediately, what does the duration approximation predict will be the percentage change in the bond price? iii. If the yield increases to 7% immediately, what is the actual percentage change in the bond price? 2. The yields on 1-year, 2-year and 3-year, risk-free, zero-coupon bonds are 2%, 2.5% and 3%, respectively. a. What is the value of a 3-year, risk-free bond with a coupon rate of 4% (annual coupons) and a face amount of $1,000? b. What are the implied forward rates in the 2nd and 3rd years (f2 and f3)? c. Under the expectations hypothesis, what are the expected yields on 1-year and 2-year zero coupon bonds 1 year from now (at time 1)? Excel exercises These problems are to be completed in Excel. Please print out and hand in a copy of the Excel spreadsheet. (Note that the problems above can also be done in Excel. However, the following problem MUST be done in Excel.) 3. Consider a 10-year, risk-free bond with a coupon rate of 5% (annual coupons) and a face amount of $1,000. a. What is the YTM on the bond if its price is $1,100? b. What is the annual HPR if you buy the bond for $1,100, hold the bond for 5 years, sell it (immediately after the payment of the time 5 coupon) at a price corresponding to a YTM of 4%, and reinvest the intermediate coupons (over the first 5 years) until time 5 at a rate of 3%? 1