Question

What is the price value of a basis point for a 5 year 6% treasury bond...

What is the price value of a basis point for a 5 year 6% treasury bond trading at par (assume a part value of 100 and that the bonds pays interest semi annually)?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
N PVF CF PVF x CF PVF x CF x N
1 0.9709 3 2.913 2.913
2 0.9426 3 2.828 5.656
3 0.9151 3 2.745 8.236
4 0.8885 3 2.665 10.662
5 0.8626 3 2.588 12.939
6 0.8375 3 2.512 15.075
7 0.8131 3 2.439 17.075
8 0.7894 3 2.368 18.946
9 0.7664 3 2.299 20.693
10 0.7441 103 76.642 766.417
Sum 100.000 878.611
Mac. Dur. 8.786
Mod. Dur. 8.530
PVBP 0.0853

Price value of a basis point (PVBP) = Modified Duration x Bond Price x 0.01%

= 8.530 x 100 x 0.01% = 0.0853

Modified Duration = Macaulay Duration / (1 + y/m) = 8.786 / (1 + 6%/2) = 8.530

Macualay Duration = Sum of PVF x CF x N / Sum of PVF x CF = 878.611 / 100 = 8.786

where, PVF - Present Value Factor = 1 / (1 + y/m)^N, and y = 6%, m = 2

CF - Cash Flows from the bond, N - Period.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose an investor can purchase a 6-year 9% coupon bond with a par value of $100...
Suppose an investor can purchase a 6-year 9% coupon bond with a par value of $100 that pays interest semi-annually. The yield to maturity for this bond is 10% on a bond-equivalent yield basis. What is the coupon interest, capital gain/loss and reinvestment income associated with this bond over its 6-year life? Assume that the reinvestment rate is equal to the yield to maturity.
Suppose an investor can purchase a 6-year 9% coupon bond with a par value of $100...
Suppose an investor can purchase a 6-year 9% coupon bond with a par value of $100 that pays interest semi-annually. The yield to maturity for this bond is 10% on a bond-equivalent yield basis. What is the coupon interest, capital gain/loss and reinvestment income associated with this bond over its 6-year life? Assume that the reinvestment rate is equal to the yield to maturity.
A Treasury bond has a face value of $10,000, a coupon of 8%, and several years...
A Treasury bond has a face value of $10,000, a coupon of 8%, and several years to maturity. Currently this bond sells for $9,260, and the previous coupon has just been paid. What is the forward price for delivery of this bond in 1 year? Assume that the interest rates for 1 year out are flat at 9% semiannually compounded. The T Bond pays coupons semi-annually. If the forward is trading in the market for $9,500 what will you do?
What is the price of a 4-year bond with a coupon rate of 10% and face...
What is the price of a 4-year bond with a coupon rate of 10% and face value of $1,000? Assume the bond is trading at 10% yield, and that coupons are paid semi-annually. Assume semi-annual compounding. Round your answer to the nearest cent (2 decimal places). What is the yield of a 3-year bond with a coupon rate of 9% and face value of $100? Assume the bond is currently trading at a price of $100, and that coupons are...
The US Treasury issued a 10-year bond with an annual coupon of 5% (face value 100)....
The US Treasury issued a 10-year bond with an annual coupon of 5% (face value 100). What is its price if the market requires a yield-to-maturity of 5%? What is its price if its coupon is paid semi-annually? Please show your work.
What is the price of a 30-year, 7% coupon rate, $1,000 face value bond that pays...
What is the price of a 30-year, 7% coupon rate, $1,000 face value bond that pays interest semi-annually, if the yield to maturity on similar bonds is 6%? a. $886.9 b. $940.7 c. $1,065.6 d. $1,138.4 e. $1,219.2
The thirty-year US Treasury bond has a 2.5% coupon and yields 3.3%. What is its price?...
The thirty-year US Treasury bond has a 2.5% coupon and yields 3.3%. What is its price? A thirty-year corporate bond with a 4% coupon is priced at par. Is it possible for the corporate bond to have a higher price than the Treasury? How is the corporate bond’s “spread” quoted? Both bonds are 100 face and semi-annual
What is the price of a 5​-year, 8.2% coupon​ rate, $1,000 face value bond that pays...
What is the price of a 5​-year, 8.2% coupon​ rate, $1,000 face value bond that pays interest annually if the yield to maturity on similar bonds is 7.2%​?
A 6-year 5% bond is selling to yield 6%. The bond pays interest semi-annually. Using the...
A 6-year 5% bond is selling to yield 6%. The bond pays interest semi-annually. Using the approximate formula 1. What is the estimated bond price for 150 basis points decrease in the yield, using approximate duration formula to estimate the new price? 2. What would explain the difference between the estimated bond price and the actual bond price you find using the financial calculator? 3. How can you correct the mispricing? Please provide calculations for the correction.
Price a 5-year 1.625% annual coupon bond with a face value of $100 on the basis...
Price a 5-year 1.625% annual coupon bond with a face value of $100 on the basis of daily treasury yield curve data for relevant rates as of July 9, 2018 available on https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield Now assume that you forecast that an upward parallel shift of 15 basis points will occur in the term structure at t=1. Work out P1, the price of the bond at t=1, and h1, the one-yearholding period return. Was this bond a good investment? Explain
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT