MAF308 Derivatives and Fixed Income Securities-Financial Budget
Inputs
o Day convention
o Annual Coupon Rate
o Yield to Maturity (Annualized)
o Number of Payment per year
o Face Value (PAR)
Outputs (determined by changing inputs)
o Discount Rate per period
o Coupon Payment
o Bond price
The yield to maturity of above particular bond is 1.858% per annum annually compounding on 11/7/2017. What is the market price of this bond on 11/7/2017 (Or equivalently to ask, how much do you need to pay to get this particular bond on 11/7/2017.
Compute the duration of the above bond on 11/7/2017. Using duration relation, explain how sensitive the above bond is to interest rate change Explain how option prices vary with different strike price and different expiration dates.Provide your reasoning rather than simply saying, for example, strike price increases, and call option price decreases.
Answer:
| Day Convention | 1 |
| Annual Coupon Rate | 3.25% |
| Yield to Maturity | 1.88% |
| Nos. of Payments | 2 |
| Face Value | $1,000 |
| Coupon Payment | $16.25 |
| Settlememnt Date | 11-07-2017 |
| Maturity Date | 21-04-2025 |
| Clean Bond Price | $1,106.55 |
| Duration | 6.94 |
| Accrued Interest | $7.14 |
| Settlement Date | 11-07-2017 |
| Lat Coupon Payment | 21-04-2017 |
| Days Since Last Coupon Payment | 80 |
| Total Days betwenn Two Payment Dates | 182 |
| Market Bond Price | $1,113.69 |
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