please show formula used on excel
Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6%. You hold the bond for live years before selling it. Note: assume S100 face value. Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copypaste a formula across a row or down a colunin, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given Data section. a. If the bond's yield to maturity is 6% when you sell it, what is the annualized rate of return of your investment? b. If the bond's yield to maturity is 7% when you sell it, what is the annualized rate of return of your investment? c. If the bond's yield to maturity is 5% when you sell it, what is the annualized rate of return of your investment? d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Explain. Maturity (years) Face value Yield to maturity Holding period (years) 30 100 6% 5 a. If the bond's yield to maturity is 6% when you sell it, what is the annualized rate of return of your investment? 6-25 Holding period (years) 5 a. If the bond's yield to maturity is 6% when you sell it, what is the annualized rate of retum of your investment? Purchase price Maturity when sold (years) Bond price when sold Rate of return b. If the bond's yield to maturity is 7% when you sell it, what is the annualized rate of return of your investment? Yield to maturity 7% Bond price when sold Rate of return c. If the bond's yield to maturity is 5% when you sell it, what is the annualized rate of return of your investment? 5% Yield to maturity Bond price when sold Rate of return d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Explain. If you sell prior to maturity. you are exposed to the risk that the may change. 2 1 Requirements 1 In cell 017, by using cell references, calculate the purchase price of the bond (1 pt.). Note: The output of the expression or function you typed in this cell is expected as a positive number. In cell D18, by using cell references, calculate the number of periods remaining until maturity (1 pt.). 3 In cell 019, by using cell references, calculate the price of the bond when sold (under YTM 1) (1 pt.). Note: The output of the expression or function you typed in this cell is expected as a positive number. 4 In cell D20, by using cell references, calculate the rate of return on the investment (1 pt.). Note: Use an expression similar to Equation (6.2) to compute the rate of return. 5 In cell D26. by using cell references, calculate the price of the bond when sold (under YTM 2) (1 pt.). Note: The output of the expression or function you typed in this cell is expected as a positive number. 6 In cell D27, by using cell references, calculate the rate of return on the investment (1 pt.). Note: Use an expression similar to Equation (6.2) to compute the rate of return. 7 In cell D33, by using cell references, calculate the price of the bond when sold (under YTM 3) (1 pt.). Note: The output of the expression or function you typed in this cell is expected as a positive number. In cell D34. by using cell references, calculate the rate of return on the investment (1 pt.). Note: Use an expression similar to Equation (6.2) to compute the rate of retum. In cell F38, type either coupon rate or YTM as the main risk factor when selling a bond before maturity (1 pt.) 8 9
