1. You are provided with the following Treasury Bond quotes:
Settlement date
Issue date
Maturity
Annual Coupon rate
Bid
Asked
10/26/2021
11/15/2020
11/15/2044
3%
116.28
116.30
10/26/2021
5/15/2020
5/15/2046
2.5%
107.28
107.30
Compute the Modified duration of a portfolio of $10 million par of each of the above two bonds.
Compute the PVBP of a portfolio of $10 million par of each of the above two bonds.
Compute the Duration of a portfolio of $10 million par of each of the above two bonds.
2. Bootstrap: You are given these prices for three Treasuries with semi-annual payments:
Bond
Maturity (Years)
Coupon Rate (%)
Price
A
0.5
8.00
97.561
B
1.0
4.00
90.703
C
1.5
6.00
80.496
Construct combinations, or portfolios, of these securities that replicate zero coupon bonds with maturities 0.5, 1.0, and 1.5 years.
Use the synthetic zeros to compute their prices.
Use the prices of zeros to compute spot rates and forward rates.
3.Use Ch8_bootstrap.xlsm file and the matrix approach to do this problem. Example 8.2 in the
textbook will also help:
Use the following data for settlement date May 28, 2010 to answer the following questions:
Coupon Rate (%)
Maturity
Price
1.25%
11/30/2010
100.550
4.875%
5/31/2011
104.513
4.5%
11/30/2011
105.856
4.75%
5/31/2012
107.966
3.375%
11/30/2012
105.869
3.5%
5/31/2013
106.760
2%
11/30/2013
101.552
2.25%
5/31/2014
101.936
2.125%
11/30/2014
100.834
Compute the annualized yield to maturity of the bonds given above.
Estimate the term-structure of interest rates using the coupon bonds given above.
Plot the yield curve and term structure on the same graph.
Estimate the price of a 0.75%, November 30, 2011 maturity bond as of May 28, 2010.
