Question
In: Finance
This is your first week at a mutual fund as an analyst. Your boss asked you...
This is your first week at a mutual fund as an analyst. Your
boss asked you to evaluate the
price risk of two 30-year bonds – Bond A and Bond B.
Bond A has a coupon rate of 4%, while Bond B has a coupon rate of
8%. Both bonds pay
their coupons semi-annually
.
A) Construct an Excel spreadsheet showing the prices of each of
these bonds for yields to
maturity ranging from 1% to 15% at intervals of 1%. Column A should
show the yield
to maturity (ranging from 1% to 15%), and columns B and C should
compute the prices
of the two bonds (using Excel’s PV function) at each interest
rate.
B) In columns D and E, compute the percentage difference between
the bond price and its
value when the yield to maturity is 6% (initial yield to maturity)
for bonds A and B,
respectively [ = {(Price (at current YTM) – Price (at initial YTM
of 6%)}/ Price (at
initial YTM of 6%)].
| Face value | $1,000.00 |
| Coupon rate bond A | 4.00% |
| Coupon rate bond B | 8.00% |
| Time | 30.00 Years |
| Initial Yield to Maturity | 6.00% |
Solutions
jeff jeffy answered 1 year agoRelated Solutions
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