<P>Hi,
<P>Can someone help me figure out problem 12. I am not sure how to get the weights for the 5 yr. zeros and the 20 yr zeros.
<P>Thank-you,
<P>Ofelia
<P> <B><I>Adam Gehr <agehr@mozart.depaul.edu></I></B> wrote:
<BLOCKQUOTE style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #1010ff 2px solid">Here are the answers to the problems I assigned in class last week.<BR><BR>1) -3.27%<BR><BR>2) a. 2.833 years<BR>b. 2.824 years<BR><BR>3) 1.952 years<BR><BR>6) a. B is shorter duration<BR>b. A has longer duration<BR><BR>7) Ranking from longest to shortest Duration: C D A B E.<BR><BR>8) a. Modified duration is 9.26 years<BR>b. Duration takes into account size and timing of all cash flows as<BR>well as the level of interest rates.<BR>c. i. Higher coupon implies lower duration<BR>ii. Duration decreases as maturity decreases.<BR><BR>10) a. Duration of obligation 1.16/.16 = 7.25 years.<BR>PV of obligation $12.5 million<BR>put 6.7 million in the 5-year bond and 5.8 million in the 20-year<BR>bond.<BR><BR>b. 14.25 million<BR><BR>12) a. market value: $6 million in 5-year zeros and $4 million in 20<BR>years.<BR><BR>b. Face value $9.66 million in 5-year bonds and $26.91 in 20-year<BR>bonds. <BR><BR><BR></BLOCKQUOTE><p><br><hr size=1>Do you Yahoo!?<br>
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