You are an investment advisor and your client would like you to explore investing in bonds. 1) Your investor has found the following semi-annual bond quotation 10 year, 5% 2) He is wondering about the following: Face Value, Coupon Payment, Number of Coupon Payments. FV = Coupon Payment = Number of payments = 3) You estimate that YTM is 6%. What is the price of the bond? Price of bond = 4) Now assume that the bond is callable at $950 in 6 years. If YTC is 5.5%, what is the price of the bond? Price of bond = 5) Now assume again that the bond is NOT callable. What is the invoice price (i.e. dirty price) 2 month from now (i.e. 2 months have passed and 4 months are left to receive interest payment? 6) What is the Macaulay Duration of this bond? Use the table below. Payment Coupon Total PV of CF TM FV (PV/Total) X (TM) # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Total = Macaulay Duration 7) What is the Dollar Value of a 0.01% (i.e. dollar value of one basis point)? 8) What is the expected % change in bond price if YTM decreases from 6% to 5.25% (i.e. decrease by 0.75% or 75 basis points)? 9) What is the modified Duration for this bond? You are an investment advisor and your client would like you to explore investing in bonds. 1) Your investor has found the following semi-annual bond quotation 10 year, 5% 2) He is wondering about the following: Face Value, Coupon Payment, Number of Coupon Payments. FV = Coupon Payment = Number of payments = 3) You estimate that YTM is 6%. What is the price of the bond? Price of bond = 4) Now assume that the bond is callable at $950 in 6 years. If YTC is 5.5%, what is the price of the bond? Price of bond = 5) Now assume again that the bond is NOT callable. What is the invoice price (i.e. dirty price) 2 month from now (i.e. 2 months have passed and 4 months are left to receive interest payment? 6) What is the Macaulay Duration of this bond? Use the table below. Payment Coupon Total PV of CF TM FV (PV/Total) X (TM) # 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Total = Macaulay Duration 7) What is the Dollar Value of a 0.01% (i.e. dollar value of one basis point)? 8) What is the expected % change in bond price if YTM decreases from 6% to 5.25% (i.e. decrease by 0.75% or 75 basis points)? 9) What is the modified Duration for this bond