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

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

You are an analyst at Microsoft, and your boss has asked you to complete a ratio...

You are an analyst at Microsoft, and your boss has asked you to complete a ratio analysis for the firm’s competitors. Use the following information to write a complete ratio analysis for Microsoft’s competitors. Firm’s are identified by tickers below. Ratio MSFT IBM SAP AAPL Profit Margin ROE ROA Debt to Equity Current Ratio 28.31% 39.35% 9.44% 92.79% 3.12 10.97% 50.34% 6.64% 270.60% 1.29 16.53% 15.03% 8.36% 40.44% 1.59 22.72% 46.05% 10.89% 97.32% 1.30

As a stock analyst, your boss, Jerry, has asked you to compile some information on stock...

As a stock analyst, your boss, Jerry, has asked you to compile some information on stock of Southern Infrastructure Corporation including a 95% confidence interval for the mean daily return that he needs to include in a report to senior management. He says that he is also not sure exactly what a 95% confidence interval means and would like you to add an explanation. You have been following the share price of Southern Infrastructure Corporation and have recorded the daily...

You are asked to give financial advice to a mutual fund manager. The fund has had...

You are asked to give financial advice to a mutual fund manager. The fund has had a history of investing in an equally -weighted portfolio of 50 stocks and is considering cutting down the number of stocks to 10 or 20. You assume that all stocks the fund is considering investing in have the same standard deviation of 40% and that the correlation between each pair of stocks is identical and equal to 0.25. a. To start your analysis, you...

Imagine that you work for the U.S. Department of Justice as an economic analyst. Your boss...

Imagine that you work for the U.S. Department of Justice as an economic analyst. Your boss emails you and asks you to analyze the following scenarios for a market made up of two firms that compete by simultaneously setting quantities. Firm 1’s quantity is denoted by q1 and the cost of production in its factory is summarized by a cost function C(q1) = 20q1. Firm 2’s quantity is denoted by q2 and the cost of production in its factory is...

Imagine that you work for the U.S. Department of Justice as an economic analyst. Your boss...

Suppose you are a mutual fund manager. Your fund owns a riskyportfolio with an expected...

Suppose you are a mutual fund manager. Your fund owns a risky portfolio with an expected rate of return of 20% and a standard deviation of 30%. The T-bill rate is 5%. Assume a client decides to invest in your risky portfolio a proportion (y) of his total investment budge and invest in a proportion (1-y) of risk-free T-bills.(i) If his overall portfolio will have an expected return 15%, then how much is the proportion y? (ii) How much is...

You have been hired as financial analyst by ABC Corporation – a globally diversified mutual fund....

You have been hired as financial analyst by ABC Corporation – a globally diversified mutual fund. Your employer is considering buying MC Electronics – a Korean company. Your boss has asked you to estimate beta for MC Electronics. You have decided to use the following model to estimate beta. RNokia = α + β(RM) + ε Discuss how will choose RM?

Assume that you are a manager and your boss asked to meet with you later today...

Assume that you are a manager and your boss asked to meet with you later today to discuss putting a team together. Since you were not provided with any other information, you need to be prepared with a written document. Identify the different options for groups and teams, indicate when each type is appropriate, and include some of the characteristics of groups and teams. Also describe the stages of formation. Also, include some of the characteristics of groups and teams.

You are the financial analyst at SewMart, an arts and crafts retail store. Your boss has...

You are the financial analyst at SewMart, an arts and crafts retail store. Your boss has asked you to review the company's financial results for the past three years and to provide an analysis of your findings: SewMart Ratios 20x9 20x8 20x7 Sales trend 16.7 22.1 25.1 Current ratio 0.78 1.90 2.20 Acid-test ratio 0.40 1.32 1.90 Accounts receivable turnover 41.29 33.20 10.60 Inventory turnover 3.58 6.25 7.80 1. Has your company performed worse, better, or about the same? 2....

You are an investment manager considering two mutual funds. The first is an equity fund and...

You are an investment manager considering two mutual funds. The first is an equity fund and the second is a long-term corporate bond fund. It is possible to borrow or to lend limitless sums safely at 1.25%pa. The data on the risky funds are as follows: Fund Expected return Expected standard deviation Equity Fund 8% 16% Bond Fund 3% 5% The correlation coefficient between the fund returns is 0.10 a You form a risky portfolio P that is equally weighted...

Subjects