Today is 1 July 2020. Siobhán has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrumen A and instrument B). Siobhán purchased all instruments on 1 July 2011 to create this portfolio and this portfolio is composed of 26 units of instrument A and 45 units of instrument B. instrument A is a zero-coupon bond with a face value of 100. This bond matures at par. The maturity date is 1 January 2030. Instrument B is a Treasury bond with a coupon rate of = 4,9% p.a. and face value of 100. This bond matures at par. The maturity date is 1 January 2023. Calculate the current duration of Siobhán's portfolio using a yield to maturity of =4.39% p.a. Express your answer in terms of years and round your answer to two decimal places. a. 4.34 Ob.5.73 c. 6.42 d. 4.13

Today is 1 July 2020. Siobhán has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrumen A and instrument B). Siobhán purchased all instruments on 1 July 2011 to create this portfolio and this portfolio is composed of 26 units of instrument A and 45 units of instrument B. instrument A is a zero-coupon bond with a face value of 100. This bond matures at par. The maturity date is 1 January 2030. Instrument B is a Treasury bond with a coupon rate of = 4,9% p.a. and face value of 100. This bond matures at par. The maturity date is 1 January 2023. Calculate the current duration of Siobhán's portfolio using a yield to maturity of =4.39% p.a. Express your answer in terms of years and round your answer to two decimal places. a. 4.34 Ob.5.73 c. 6.42 d. 4.13

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 9P

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David Palmer identified the following bonds for investment: Bond A: A $1 million par, 10% annual coupon bond, which will mature on July 1, 2025. 2) 1) Bond B: A $1 million par, 14% semi-annual coupon bond (interest will be paid on January 1 and July 1 each year), which will mature on July 1, 2031. Bond C: A S1 million par, 10% quarterly coupon bond (interest will be paid on January 1, April 1, July 1, and October 1 each year), which will mature on July 1, 2026. 3) The three bonds were issued on July 1, 2011. (a) If Bond B is issued at face value and both Bond B and Bond A are having the same yield to maturity (EAR) at issuance, calculate the market price of Bond A on July 1, 2011. [Note: Full mark would only be given to correct answer of which the values of those variables not provided in the question directly are derived.] (b) David Palmer purchased Bond C on January 1, 2014 when Bond C was priced to have a yield to maturity (EAR) of 10.3812891%. David subsequently sold Bond C on…