FIN30021 Module 4 Class SWIN BUR * NE * SWINBURNE UNIVERSITY OF TECHNOLOGY
Question 1 Calculate the yield for a 4-year, 5% $100 semi-annual coupon bond which has a yield to maturity of 5.7%. a. Assuming we hold it until maturity and the yield changes to 5.4% The yield has changed, and we assume that the coupons are reinvested at this rate (5.4%) Price at purchase was 97.5275 Calculate the future value of the coupons (i.e. $2.50 every 6 months) [00. 0000×00. 0000090 [ + 00. 0000×00. 00004 0 + 00. 0000xp0. 4000000 0 + 00. 0010-00. 0000000 0 + 40. 0000×00. 0000000 0 ]+ 00. 0000×00. 00000000 + 00. 0000×00. 0000021 ? + 00. 0000 = 0000. 00000000 ( 00 = ( ? - II = 10. 00000000 00000000 000000000000 0000000000 0000 00. 00000000 ? 00 = 0000. 00000000 Just compound interest formula 0000 = 0010(01 +00) 00 2 SWIN BUR . NE MODULE 4 CLASS
Question 1 b. Assuming we sell it after 3 years at the yield of 5.4% ( this is the re- investment rate) E F G 1 Price at purchase was 97.5275 Price at sale: 99.6156 Part b Price at purchase $97.5275 =- PV(2.85%,8,2.5,100) Price when sold early $99.6156 =- PV(2.7%,2,2.5,100) Calculate the future value of the coupons (ie $2.50 every 6 months) 00. 0000×00. 0000000 [ + 00. 0000 x00. 000000 ? + 00. 0000xp0. 4000000 0 + 00. 0000 -100. 0000000 0 + 00. 0000×00. 0000000 0 + 00. 0000 = 0000. 00000000 - 10 = 100000. 00000010 00 L 000000000000 000000000000600000 00 = ? 1000000000 0000. 00000000 3 SWIN BUR . NE MODULE 4 CLASS