Given Solve for Bond maturity (in years, given) Coupon rate (given) Bond price (

Question

Given Solve for Bond maturity (in years, given) Coupon rate (given) Bond price (given) Zero-coupon discount factor (calculated) Zero-coupon yields (calculated) Coupon yields (calculated) 0.5 0% 98.04 1 4.00% 100.00 1.5 6.00% 102.00 2 7.00% 102.50 2.5 6.00% 101.00 3 4.00% 100.00

5) Given Solve for and Using Zero coupon DFs solve for p eand yields Bond maturity Coupon rate in years, given) (given) Zero-coupon yields Bond price given) 98.04 100.00 102.00 102.50 101.00 100.00 Coupon yields discount factor Amount coupon Maturity Solve For Price YTM (IRR) 100 100 10.00% 100 2.50% 2.00 100 5.00% 1.50 100 100 2.50% 3.00 ated)(calculated (calculated) 0.5 096 4.00% 6.00% 7.00% 6.00% 4.00% 0.9804 0.9615 0.9346 0.8953 0.8731 0.8890 5.00% 10.00% 2.00 2.00 2.50 1.5 2.5

Explanation / Answer

Price of bond = 100 * Discounted factor.

For 2 years maturity = 100* 0.8953 =$89.53 and so on ,

For YTM , to calculate IRR , Use Function IRR( value array,guess)

IRR calculation detailed below:

Amount 100 100 100 100 100 100 Coupon 5% 10% 2.50% 5% 10% 2.50% Maturity 2 2 2 1.5 2.5 3 Solved Price 89.53 89.53 89.53 93.46 87.31 88.9 YTM(IRR) 11% 16.97% 8.46% 9.51% 16.48% 5.06%

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