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Question 3, 4 and 5 please. Question 2 has already been answered. 2. Find the prices for the Treasuries in problem 1 given the following
Question 3, 4 and 5 please. Question 2 has already been answered.
2. Find the prices for the Treasuries in problem 1 given the following coupon information. a) 2-year Treasury has a 0.13% coupon b) 5-year Treasury has a 0.26% coupon c) 10-year Treasury has a 0.63% coupon d) 20-year Treasury has a 1.38% coupon 3. For the Treasury instruments in question 2, a) Calculate the modified duration b) Calculate the convexity 4. For a 0.75% increase in interest rates, what is the percentage change in the price of the instruments in question 2? a) Using the duration approximation b) Using the convexity approximation c) Calculate the actual percentage change in prices. 5. Given the bonds in question 2 (Treasuries only) and if you have a four-year investment horizon for $100,000, what bond portfolio would you create and why? Give portfolio weights in dollars amounts. Figure 1 Example Corp A and Treasury Yield Curves 6.0% 5.0% Yield to Maturity 4.0% 3.0% 2.0% 1.0% 0.0% 0 07 10 15 20 25 Time to Maturity Treasury Corp. A 2. Find the prices for the Treasuries in problem 1 given the following coupon information. a) 2-year Treasury has a 0.13% coupon b) 5-year Treasury has a 0.26% coupon c) 10-year Treasury has a 0.63% coupon d) 20-year Treasury has a 1.38% coupon 3. For the Treasury instruments in question 2, a) Calculate the modified duration b) Calculate the convexity 4. For a 0.75% increase in interest rates, what is the percentage change in the price of the instruments in question 2? a) Using the duration approximation b) Using the convexity approximation c) Calculate the actual percentage change in prices. 5. Given the bonds in question 2 (Treasuries only) and if you have a four-year investment horizon for $100,000, what bond portfolio would you create and why? Give portfolio weights in dollars amounts. Figure 1 Example Corp A and Treasury Yield Curves 6.0% 5.0% Yield to Maturity 4.0% 3.0% 2.0% 1.0% 0.0% 0 07 10 15 20 25 Time to Maturity Treasury Corp. AStep by Step Solution
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