CH2

Q.2
Future value:
annual rate 6.25%
years 4.5
payments/year 1
payment $0.00
presemt value $ 10,400,000.00
Future value ($13,661,977.43)
No, it will be short by 14,000,000.00
($13,661,977.43)
338,022.57

Q.8 A B

settelment date 1/1/2000 settelment date 1/1/2000

maturity date 12/31/2008 maturity date 12/31/2019
annual coupon rate 8.00% annual coupon rate 9.00%
YTM 7.00% YTM 9.00%
Redumption value 100 Redumption value 100
frequency 2 frequency 2
Bond price(% of par) 106.59 Bond price(% of par) 100.00
BOND Price$ $ 1,065.93

Q.9 A B
settelment date 1/1/2000 settelment date 1/1/2000
maturity date 12/31/2009 maturity date 12/31/2009
annual coupon rate 6.00% annual coupon rate 6.00%
YTM 15.00% YTM 16.00%
Redumption value 100 Redumption value 100
frequency 2 frequency 2
Bond price(% of par) 54.13 Bond price(% of par) 50.91
BOND Price$ $ 541.30 BOND Price$ $ 509.14

% Change -5.94%

CH3
Q1
0 $ (7,704.00)
1 $ 2,000.00
 2 $ 2,000.00
3 $ 2,500.00
4 $ 4,000.00
IRR 11.99%

Q.7
A
settelment date 1/1/2000
maturity date 12/31/2017
coupon rate 9.08%
Redumption rate 100
price 100 100.03
frequency 2
Yield 9.08% 9.08%

B
settelment date 1/1/2000
maturity date 12/31/2004
coupon rate 11.00%
Redumption rate 100
price $ 108.8 108.7717382
frequency 2
Yield 8.79% Yield formula 8.79%

C
settelment date 1/1/2000
maturity date 12/31/2004
coupon rate 11.00%
Redumption rate 100
price $ 116.9 116.8906906
frequency 2
Yield 6.94%
D
settelment date 1/1/2000
maturity date 12/31/2004 12/31/2004
coupon rate 5.00%
Redumption rate 105
price $ 89.15 89.1519739
frequency 2
Yield 8.53% 8.53%
 CH4

Q.2 Bond A Bond B

settelment date 1/1/2000 settelment date 1/1/2000
maturity date 12/31/2001 maturity date 12/31/2001
annual coupon rate 8.00% annual coupon rate 8.00%
YTM 8.00% YTM 8.01%
Redumption value 100 Redumption value 100
frequency 2 frequency 2
Bond price(% of par) 100.00 Bond price(% of par) 99.98
Price value of basis point $ (0.0181)

B Bond A Bond B
settelment date 1/1/2000 settelment date 1/1/2000
maturity date 12/31/2001 maturity date 12/31/2004
coupon rate 8.00% coupon rate 9.00%
YTM 8.00% YTM 8.00%
COUPONS/YEAR 2 COUPONS/YEAR 2
Duration(yrs) 1.885 Duration(yrs) 4.15

C
Bond A Bond B
settelment date 1/1/2000 settelment date 1/1/2000
maturity date 12/31/2001 maturity date 12/31/2004
coupon rate 8.00% coupon rate 8.00%
YTM 8.00% YTM 8.00%
COUPONS/YEAR 2 COUPONS/YEAR 2
Modified Duration 1.81 Modified Duration 4.05

Q3 assumptions
settelment date 1/1/2000 settelment date 1/1/2000
maturity date 12/31/2008 maturity date 12/31/2010
annual coupon rate 8.00% annual coupon rate 10.00%
YTM 2.00% YTM 2.00%
Redumption value 100 Redumption value 100
frequency 2 frequency 2
Bond price(% of par) 149.1808 Bond price(% of par) 178.6236
Answer
the Z bond will have the greatest price because it has the highest coupon rate

Q4
A
Bond A Bond B
settelment date 1/1/2000 settelment date 1/1/2000
maturity date 12/31/2001 maturity date 12/31/2004
annual coupon rate 8.00% annual coupon rate 9.00%
YTM 9.00% YTM 9.00%
Redumption value 100 Redumption value 100
frequency 2 frequency 2

Bond price(% of par) 98.21 Bond price(% of par) 100.00

Bond price $ $ 982.08 Bond Price $ $ 1,000.00

B
Bond A
settelment date 1/1/2000
maturity date 12/31/2001
coupon rate 8.00%
YTM 9.00%
COUPONS/YEAR 2
Duration(yrs) 1.884 1.802500424
PRICE $ 981.16

Q.17
Bond Market value Duration
W $ 13,000,000.00 2
X $ 27,000,000.00 7
Y $ 60,000,000.00 8
Z $ 40,000,000.00 14
Total $ 140,000,000.00
A
The portfolio's Duration 8.96
B
If interest rates change by 0.50%
Percentage change in the value -4.48%
(-D/(1+YTM))*chg YTM

C
The contribution to portfolio duration for each bond

Bond Market value Duration Wt

W $ 13,000,000.00 2 9.29%
X $ 27,000,000.00 7 19.29%
Y $ 60,000,000.00 8 42.86%
Z $ 40,000,000.00 14 28.57%
Total $ 140,000,000.00
 Q.7
Years Liability PV
1 $ 2,000,000.000 $ 1,858,736.06
2 $ 3,000,000.000 $ 2,591,174.80
3 $ 5,400,000.000 $ 4,334,679.04
4 $ 5,800,000.000 $ 4,326,920.42
annual IR 7.60%
Investment Required $ 13,111,510.33

C D

settelment date 1/1/2000 settelment date

maturity date 12/31/2014 maturity date
annual coupon rate 6.00% annual coupon rate
YTM 10.00% YTM
Redumption value 100 Redumption value
frequency 2 frequency
Bond price(% of par) 69.26 Bond price(% of par)

C D
settelment date 1/1/2000 settelment date
maturity date 12/31/2009 maturity date
annual coupon rate 6.00% annual coupon rate
YTM 5.00% YTM
Redumption value 100 Redumption value
frequency 2 frequency
Bond price(% of par) 107.79 Bond price(% of par)
BOND Price$ $ 1,077.93 BOND Price$

% Change -7.23%

Q.8
A
It's a fixed income security that has cash flows including interest plus principal repayments.
B
1- Coupon Rate
2- Schedualed Principal Repayments
3- Prepayments
C
It's the interest rate that will make the PV of the project cash flow equal the market price.

Q13
Total of return 8.00%
Because it's Zero coupon
 Bond A Bond B
settelment date 1/1/2000 settelment date
maturity date 12/31/2004 maturity date
annual coupon rate 9.00% annual coupon rate
YTM 8.00% YTM
Redumption value 100 Redumption value
frequency 2 frequency
Bond price(% of par) 104.05 Bond price(% of par)
Price value of basis point
$ (0.0415)

D Bond A
APPROX DURATION 1.814

E Bond A
CONVEXITY 4.277

F Bond A
APPROXMATE CONVEXITY 4.277

settelment date 1/1/2000

maturity date 12/31/2011
annual coupon rate 11.00%
YTM 2.00%
Redumption value 100
frequency 2
Bond price(% of par) 195.58
 Bond B
settelment date 1/1/2000
maturity date 12/31/2004
coupon rate 9.00%
YTM 9.00%
COUPONS/YEAR 2
Duration(yrs) 4.13
PRICE $ 997.56

Wt Duration
9.29% 0.185714286
19.29% 1.35
42.86% 3.428571429
28.57% 4
8.964285714

Contribution to Duration
0.186
1.35
3.43
4
8.96
 1/1/2000
12/31/2013
0.00%
8.00%
100
2
33.36

1/1/2000
12/31/2009
6.00%
6.00%
100
2
100.00
$ 1,000.00

al repayments.
market price.
 1/1/2000
12/31/2004
9.00%
8.01%
100
2
104.01

Bond B
3.994

Bond B
19.763

Bond B
19.763
 C Bond A Bond B
-17.920 40.550
BOND PRICE CHANGE -0.01791967 0.04055
D Bond A Bond B
-0.114 -0.618
Accuracy 0.098 0.394
E

This is because; YTM influences volatility, Ceteris Paribus. This means the higher the
yield, the lower its volatility. This is the same for duration, this means the 10% will
have smaller volatility and duration.