Question:
A bond portfolio consists of the following bonds.
BondCoupon Years to MaturityRequired YieldPar Amount ($MM)
A 4.25% 24.17%$3.75
B3.75%64.33%$4.30
C3.25%124.92%$3.75
D0.00%285.53%$10.00
(a) Calculate the price per $1,000 par value for each bond.
(b) Calculate the aggregate market value for each bond.
(c) Calculate the aggregate market value for the portfolio.
| Bond | Coupon | Years to maturity | Required yield | Par amount $mm | |
| A | 4.25% | 2 | 4.17% | 3.75 | |
| B | 3.75% | 6 | 4.33% | 4.30 | |
| C | 3.25% | 12 | 4.92% | 3.75 | |
| D | 0.00% | 28 | 5.33% | 10.00 | |
| a) | Price of each bond | ||||
| Bond | Price | ||||
| A | $1,001.51 | PV(4.17%,2,4.25%*1000,1000,) | |||
| B | $969.92 | PV(4.33%,6,3.75%*1000,1000,) | |||
| C | $851.31 | PV(4.92%,12,3.25%*1000,1000,) | |||
| D | $233.64 | PV(5.33%,28,0%*1000,1000,) | |||
| b) | Market value of each bond | ||||
| Bond | No. of bonds | Market value = Price*No. of bonds ($mm) | |||
| A | 3750 | $3.76 | |||
| B | 4300 | $4.17 | |||
| C | 3750 | $3.19 | |||
| D | 10000 | $2.34 | |||
| c) | Aggregate market value | $13.46 mm | |||
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