Determine the price of the bond

Assignment Help Finance Basics
Reference no: EM133072484

Suppose the Treasury zero curve is 0.5% for 6 months and 0.75% for 1 year, as APRs with semi-annual compounding. Consider a 2% Treasury bond with 1 year remaining.

(a) Determine the price of the bond.

(b) Determine the yield-to-maturity expressed as an APR with semi-annual compounding.

(c) Determine the duration (either modified or effective) based on the yield-to-maturity.

(d) Determine the 0.5-year and 1.0-year rate durations empirically.

(e) Verify that sum of the rate durations is approximately equal to the duration. They may not be exactly the same because the yield curve is not flat, but if you have computed (a) through (d) correctly then they should be reasonably similar.

Reference no: EM133072484

Questions Cloud

Black-scholes prediction for a european put : What is the Black-Scholes prediction for a European put option on Intel with an exercise price of $28 and 40 days to maturity?
Calculate the potential profits : A European call option and put option on a stock both have a strike price of $35.00and an expiration date in three months. Both sell for $4.85. The risk-free in
Eastern deciduous forest and urban ecology : We will cover the eastern deciduous forest and urban ecology, so with those concepts in mind we will focus on how the eastern deciduous forest
Simple interest versus compound interest : First City Bank pays 7.5 percent simple interest on its savings account balances, whereas Second City Bank pays 7.5 percent interest compounded annually.
Determine the price of the bond : Suppose the Treasury zero curve is 0.5% for 6 months and 0.75% for 1 year, as APRs with semi-annual compounding. Consider a 2% Treasury bond with 1 year remaini
Determine the total flexible budget labor cost variance : Model ZX40, has a standard labor time of 0.5 hour and a standard labor rate of $12.50 per hour. Determine the total flexible budget labor cost variance
Different types of companies : If Nike's Current Ratio is 1.6 and the Pittsburgh Pirates Current Ratio is 0.9, we know from time series analysis that __________.
Roles in global civil society : Compare their roles in global civil society. Why IGOs that are formed by treaties are more advantageous and effective than grouping of sovereign nations.
How would ARRANGE Co recognize revenue : On November 1, 20x1, ARRANGE Co. entered into a franchise contract with COLLOCATE Co. How would ARRANGE Co recognize revenue

Reviews

Write a Review

Finance Basics Questions & Answers

  Return on investment-education funding

Return on Investment - Education Funding. Develop a three to five page analysis on the projected return on investment for your college education and projected future employment. This analysis will consist of two parts.

  Similarities and differences in three concepts

Identify the similarities and differences in these three concepts: procedural justice, workplace due process, and ethical decisions about behavior

  Determining the level of risk tolerance

You play a game that has the following payoffs: 35% probability of winning $1,00035% probability of losing $1,500 30% probability of winning $550

  What is the standard deviation of stock a

The following are estimates for two stocks in a portfolio of 60 stocks.

  How to check the claims out on the web

A guest speaker visiting your class contends that Bank of America is one of the most profitable banks of its size in the United States.

  Settlement and the fence

?It is two days before settlement and the fence has fallen down completely since you inspected last. What do you do?

  How the concepts and skills could be used in the real world

Competition, inflation, GPD, prices changes, Dividends/bond distribution strategy, and governmental decisions are the most significantly considerations.

  Wills wheels inc reported a debt-to-equity ratio of 65

wills wheels inc. reported a debt-to-equity ratio of .65 times at the end of 2008. if the firms total debt at year-end

  Compute the project net cash flows for year 10

The company's marginal ordinary tax rate is 40 percent and the capital gains rate is 20 percent. Compute the project's net cash flows for year 10.

  Prepare closing entries and financial statements

You have been asked to record the transactions associated with this business for the month of February, prepare adjusting entries, prepare closing entries and prepare the financial statements

  How you set up the line

This week you are going to design and balance an assembly line. We are going to take the simple task of making cupcakes, break the work up into stations.

  Determine the prices of the straddle and the chooser

Suppose at 90 days before expiration, the stock is at 28. Find the value of the chooser option at expiration if the stock price ends up at 50 and at 30.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd