Module 3 Mini-Case fecha lmite Apr 19, 2024 16:06 CDT You are a bond analyst working for a hedge fund. A bond you follow has face value 100, has a coupon rate of 5% (paid once a year) and matures in 5 years. You are trying to find if there is any profitable trading strategy. You've done extensive research and have formed your opinions on future economic conditions. As a result, you expect that there will soon be a major shift in the yield curve. The current and the expected yield curve is shown below: Year Current Expected 1 1% 3.00% 2 1.50% 2.50% 3 2.00% 3.50% 4 3.00% 4.00% 5 5.00% 5.00% Question 1/3 1/1 punto (calificado) Calculate the price of the bond based on the current yield curve? (use 2 decimal digits) 101.23 Answer: answer 101.23 o 101.23 o $101.23 o 101,23 o $101,23 Explanation The cash flows of the bond are 5, 5, 5, 5, and 105 in years 1, 2, 3, 4 and 5. The price of the bond is therefore P = 5/(1+1%) + 5/(1+1.5%)^2 + 5/(1+2%)^3 + 5/(1+3%)^4 + 105/(1+5%)^5 = 101.23 Question 2/3 0/1 punto (calificado) Calculate the price of the bond based on the expected yield curve $. _(keep two decimal points)