soln_ch_16_fi_mgt
20
CHAPTER 16: FIXED INCOME PORTFOLIO MANAGEMENT 1. The percentage bond price change will be: – × ∆y = –× .005 = –.0327 or a 3.27% decline. 2. Computation of duration: a. YTM = 6% (1) (2) (3) (4) (5) Time until payment (years) Paymen t Payment discounted at 6% Weight of each payment Column (1) × Column (4) 1 60 56.60 .0566 .0566 2 60 53.40 .0534 .1068 3 1060 890.00 .8900 2.6700 Column Sum 1000.00 1.0000 2.8334 Duration = 2.833 years b. YTM = 10% (1) (2) (3) (4) (5) Time until payment (years) Paymen t Payment discounted at 6% Weight of each payment Column (1) × Column (4) 1 60 54.55 .0606 .0606 2 60 49.59 .0551 .1102 3 1060 796.39 .8844 2.6532 Column Sum 900.53 1.0000 2.8240 Duration = 2.824 years, which is less than the duration at the YTM of 6%. 3. For a semi annua l 6% coupon bon d sel li ng a t par, we us e pa rameters: coupon = 3% per half-year period, y = 3%, T = 6 semiannual periods . Using Rule 8, we find that: D = (1.03/.03) [ 1 – (1/1.03) 6 ] = 5.58 half-year periods = 2.79 years If the bond’s yield is 10%, use Rule 7, setting the semiannual yield to 5%, a nd semiannual coupon to 3%: 16-1
-
Upload
silviu-trebuian -
Category
Documents
-
view
216 -
download
0
Transcript of soln_ch_16_fi_mgt
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 1/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 2/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 3/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 4/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 5/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 6/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 7/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 8/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 9/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 10/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 11/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 12/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 13/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 14/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 15/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 16/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 17/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 18/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 19/20
7/29/2019 soln_ch_16_fi_mgt
http://slidepdf.com/reader/full/solnch16fimgt 20/20
