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Obtain the latest yield curve rates from US Department of Treasury website. Use these yield curve rates, price a 10-year bond with $1000 face value,
Obtain the latest yield curve rates from US Department of Treasury website. Use these yield curve rates, price a 10-year bond with $1000 face value, 4% coupon rate with semi-annual coupon payments. Therefore, this bond will have 20 periods to maturity. When yield curve rates are not available in between two periods, use simply linear extrapolation. For example, year 8's interest rate can be the average of Year 6's and Year 10's interest rates. After you price the bond, calculate the implied YTM of this bond.
Obtain the yield curve rates | 1 pt |
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Timeline and variables setup | 1 pt |
Assign the appropriate discount rates for each period | 2 pts |
Calculate Bond price | 1 pt |
Calculate YTM | 1 pt |
Total | 6 pts |
If you didn't complete all the class work prior to this sheet | -2 pts |
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