Answers to text problems

[Ofelia Sanchez]

Hi,
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.  
Thank-you, 
Ofelia
 Adam Gehr <agehr at mozart.depaul.edu> wrote:Here are the answers to the problems I assigned in class last week.

1) -3.27%

2) a. 2.833 years
b. 2.824 years

3) 1.952 years

6) a. B is shorter duration
b. A has longer duration

7) Ranking from longest to shortest Duration: C D A B E.

8) a. Modified duration is 9.26 years
b. Duration takes into account size and timing of all cash flows as
well as the level of interest rates.
c. i. Higher coupon implies lower duration
ii. Duration decreases as maturity decreases.

10) a. Duration of obligation 1.16/.16 = 7.25 years.
PV of obligation $12.5 million
put 6.7 million in the 5-year bond and 5.8 million in the 20-year
bond.

b. 14.25 million

12) a. market value: $6 million in 5-year zeros and $4 million in 20
years.

b. Face value $9.66 million in 5-year bonds and $26.91 in 20-year
bonds. 





---------------------------------
Do you Yahoo!?
Yahoo! Tax Center - forms, calculators, tips, and more-------------- next part --------------
An HTML attachment was scrubbed...
URL: http://mailman.depaul.edu/pipermail/fin335/attachments/20030304/d8466402/attachment.htm