Corporate Finance Answer Chapter3

4. We calculate the yield for each of the three chemical stick tos. solving for y in the following equation: 81.62 ? 2 2 2 2 2 ? ? ? ?? ? ? 2 3 9 1 ? y 1 (1 ? y 1 ) (1 ? y 1 ) (1 ? y 1 ) (1 ? y 1 )10 For the 2% bond, this marrow y 1 =4.3% For the 4% bond: 98.39 ? 4 4 4 4 4 ? ? ? ?? ? ? 2 3 9 1 ? y 2 (1 ? y 2 ) (1 ? y 2 ) (1 ? y 2 ) (1 ? y 2 )10 y 2 =4.2% For the 8% bond: 133.42 ? 8 8 8 8 8 ? ? ? ?? ? ? 2 3 9 1 ? y 3 (1 ? y 3 ) (1 ? y 3 ) (1 ? y 3 ) (1 ? y 3 )10 y 3 =3.9% So 2% bond offered highest yield to maturity, 8% bond had the lowest. approximate the bond issued on 2012/10/19, and mature on 2022/10/19 Duration=DURATION?settlement, maturity, coupon, yield, frequency,[basis]? Duration1=DURATION(41201,44853,2%.4%,1)=9.07 historic purpose Duration2=DURATION(41201,44853,4%.4%,1)=8.44 years Duration1=DURATION(41201,44853,8%.4%,1)=7.64 years Therefore, the bond with the 2% coupon had the nightlong durations, and the bond with 8% coupon had the shortest durations. 17. We calculate the government bond with 5 part annual coupon: ? 1 ? 1,000 1 PV ? 50 ? ? ? ? ? $1,108.

34 6 ? 6 ? 0.03 0.03 ? (1.03) ? (1.03) Price ace year later (yield = 3%): Lingnan MBA Center Lingnan (University) College, Sun Yat-sen University ? 1 ? 1,000 1 PV ? 50 ? ? ? ? ? $1,091.59 5 ? 5 ? 0.03 0.03 ? (1.03) ? (1.03) rank of restitution = [$50 + ($1,091.59 $1,108.34)]/$1,108.34 = 3.00% Price one year later (yield = 2%): ? 1 ? 1,000 1 PV ? 50 ? ? ? ? ? $1,141.40 5 ? 5 ? 0.02 0.02 ? (1.02) ? (1.02) Rate of return = [$50 + ($1,141.40 $1,108.34)]/$1,108.34 = 7.49% If you demand to get a wide essay, order it on our website: BestEssayCheap.com

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