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January 31, 2015

January 31, 2015

Posted by **jessie** on Sunday, September 11, 2011 at 9:07pm.

how to get the solution please help me

question:

1.Find the price of a 10% coupon bond with 10 years to maturity if interest rates:

A) increase by 1%

B) decrease by 1%

C) increase by 1.5%

D) decrease by 1.5%

Find the price of an 8% coupon bond with 30 years to maturity if interest rates:

A) increase by 3/4%

B) decrease by 3/4%

C) increase by 1 1/4%

D) decrease by 1 1/4%

2.A share is valued at present at 80 dollars. In nine months it will give a dividend of 4% of its value at that time.Determine the forward price for delivery in one year given that the rate of interest is 5% a year. my answer is 80.74

3.Calculate approximately the duration of a portfolio containing a cupon bearing-bond which matures in two years with face value 100'000

SEK and pays a 6%-coupon (this means that the coupon is paid every six month at 3% of the face value,) plus a short position of a futures contract with maturity in two years on a three year (at the time of maturity of the futures) 6% coupon-bearing bond (the¯rst coupon payment is six months after the maturity of the futures)

with face value 50'000 SEK. Interest rates are today 5.5% a year with

continuous compounding for any length of duration. my answers.(0.514 years)

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