BAFI 355 BUSS207 Fall, 2019 Assignment 3 (Due by November 25, 2019) Please solve the following questions. If you prefer to work in a group in completing this assignment, you may do so. Groups are...

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Answered Same DayNov 19, 2021

Answer To: BAFI 355 BUSS207 Fall, 2019 Assignment 3 (Due by November 25, 2019) Please solve the following...

Kushal answered on Nov 21 2021
152 Votes
1. Fixed Income – Calculating the yield to maturity and the return on the bodn if the bond is held to maturity
A.
    Coupon Rate
    7%
    
    
    
    
    
    

    
    
    
    
    Face Value
    1000
    
    
    
    
    
    
    
    
    
    
    Maturity
    5 Years
    
    
    
    
    
    
    
    
    
    
    Price
    976.67
    
    
    
    
    
    
    
    
    
    
    Cash flows
    
    
    
    
    
    
    
    
    
    
    
    
    t=0
    t=0.5
    t=1
    t=1.5
    t=2
    t=2.5
    t=3
    t=3.5
    t=4
    t=4.5
    t=5
    
    -976.67
    35
    35
    35
    35
    35
    35
    35
    35
    35
    35
    
    
    
    
    
    
    
    
    
    
    
    1000
    
    -976.67
    35
    35
    35
    35
    35
    35
    35
    35
    35
    1035
    YTM (Semi Annual)
    3.78%
    
    
    
    
    
    
    
    
    
    
    YTM Yearly
    7.71%
    
    
    
    
    
    
    
    
    
    
B. I will not buy this bond today since my required rate of return is higher than what the current yield on the bond is. Hence, in case the economic conditions change in the country and the bond yields more than 9% , then we can think of buying the bond.
2. Bond Pricing – Calculating the bond prices for different yield to maturities prevailing in the markets of macroeconomics
A. Bond Price
    Bond A
    
    
    Bond B
    
    Coupon Rate
    7%
    
    Coupon Rate
    7%
    Face Value
    1000
    
    Face Value
    1000
    Maturity
    20
    
    Maturity
    5
    YTM Yearly
    9.00%
    
    YTM Yearly
    9.00%
    
    
    
    
    
    Price
    817.4
    
    Price
    935.2
B.
    Bond A
    
    
    Bond B
    
    Coupon Rate
    7%
    
    Coupon Rate
    7%
    Face Value
    1000
    
    Face Value
    1000
    Maturity
    20
    
    Maturity
    5
    YTM Yearly
    11.00%
    
    YTM...
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