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Bond Calculations

12. (6 pts)  An 8.000% semi-annual coupon corporate bond that matures on 3/15/25, is purchased for settlement on 4/15/21.  The yield to maturity is 6.333% quoted on a street convention semiannual bond basis (APR2).  Accrued interest is calculated using the 30/360 day count convention.  

(a)  What is the flat (clean) price of the bond on the SDT?  (use the BA II Plus BOND spreadsheet)

(b)  What is the accrued interest on the SDT? (use the BA II Plus BOND spreadsheet)

(c)  How many days are there (“T”) in the current coupon period?

(d)  How many days are there (“t”) between the last coupon date and the SDT?

(e)  What is the bond’s Macauley Duration on the SDT?  (use the alternative formula given on slide #50 of the chapter 4 slides and show your work).  Remember to use at least 3 decimal places.

(f)  What is the modified duration of the bond, to at least 3 decimal places?

 

13. (7 pts)  For the bond in problem 12 above, if the yield to maturity rises by 65 basis points (bps), use the modified duration to calculate the new full bond price.  Remember to use at least 3 decimal places.

 

14. (7 pts) For the bond in problem 12 above, if the yield to maturity falls by 80 basis points (bps), use the modified duration to calculate the new full bond price.  Remember to use at least 3 decimal places.

 

15. (7 pts) A 20-year, 6.500% annual payment bond settles on a coupon date.  The bond's yield to maturity is 9.400%.   What is the bond’s approximate modified duration to 3 decimal places?  Use yield changes of +/- 25 bps around the yield to maturity for your calculations.

 

16. (7 pts)  Consider the bond from problem (15) above.  

(a)  Calculate the approximate convexity for the bond to at least 3 decimal places.

(b)  Calculate the change in the full bond price for a 35 bps change in yield to at least 3 decimal places.

 


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