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How can I calculate these on excel? 1.[10 pts] The average life of a bond is defined as where PCF t is the principal cash
How can I calculate these on excel?
1.[10 pts] The average life of a bond is defined as
where PCFt is the principal cash flow at time t, and T is the maturity of the bond.
a. [1 pt.] What is the average life of a zero-coupon bond? Show work
b. [1 pt.] What is the average life of an interest only bond? Show work
c. [1 pt] Consider a fully amortizing level-payment fixed-rate mortgage that does not default, nor is it ever curtailed or prepaid. Show that
where c is the mortgage contract rate.
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