Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Jse a FINANCIAL calculator and please show work: 1. Estimate the IRR of following project using a trial-and-error approach. Tip: start with a 10% rate,
Jse a FINANCIAL calculator and please show work: 1. Estimate the IRR of following project using a trial-and-error approach. Tip: start with a 10% rate, if the NPV is positive then use 15%, if it is negative then try 5%. Iterate three times (First =5%, then 2,5% and finally =1,25%). 2. A Treasury bond has a fix coupon rate of 15%(150), a face value of 1.000 and matures 3 years from today. If now is traded at 952 then calculate: a. Yield to maturity (IRR is asked). Explain your answer. b. Duration using the yield to maturity as the discount rate (Modified Duration). c. What happens with bond's price if you can buy treasury bonds at an interest rate of 11% ? Comment your answer. Using: Duration(b)Macaulay=kBondPrice(n)(PVofCashFlows) n is the number of periods until each cash flow is paid. k is the number of times coupon interest is paid per year. Duration(D*)Modified=(1+yield/k)MacaulayDuration yield is the yield-to-maturity of the bond. k is the number periodic payment (compounding) periods per year
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started