Revision as of 00:20, 5 December 2023 by Admin (Created page with "Assume that spot interest rates are as follows: {| class="table" ! Maturity (Year) !! Spot Rate (%) |- | 1 || 3.0% |- | 2 || 3.5% |- | 3 || 4.0% |- | 4 || 4.5% |} Compute the price of a bond with coupon rate 5% and 2 years to maturity. <ul class="mw-excansopts"> <li>$100</li> <li>$101</li> <li>$103</li> <li>$105</li> <li>$107</li> </ul> '''References''' {{cite web |url=https://alo.mit.edu/wp-content/uploads/2015/06/PS_Part1.pdf |last1=Lo |first1=Andrew W. |last2 =...")
Dec 05'23
Exercise
Assume that spot interest rates are as follows:
| Maturity (Year) | Spot Rate (%) |
|---|---|
| 1 | 3.0% |
| 2 | 3.5% |
| 3 | 4.0% |
| 4 | 4.5% |
Compute the price of a bond with coupon rate 5% and 2 years to maturity.
- $100
- $101
- $103
- $105
- $107
References
Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.
Dec 05'23
Solution: C
Price equals
[[math]]\frac{5}{1.03^1}+\frac{105}{1.035^2}=\$ 102.87 [[/math]]
References
Lo, Andrew W.; Wang, Jiang. "MIT Sloan Finance Problems and Solutions Collection Finance Theory I" (PDF). alo.mit.edu. Retrieved November 30, 2023.