Excel Homework #1 V1.0 (Due September 15 at 2359)
Fin 3515 Fall 2017
Excel Homework #1 v1.0 (Due September 15 at 2359)
You may work in groups of 2 and will be submitting one assignment per group. Submit an Excel workbook with your answers clearly highlighted. The assignment is worth 20 points; 2 points are deducted for late submissions. No submissions will be accepted after September 17.
1. Fill in the bond prices using a $1000 par value in the blank cells in the table below.
a. If you believed rates were going to rise, which bond would you choose?
b. What is the trade-off you are making if rates do not rise?
Bond / Maturity / Coupon Rate / Yield / Price / Price @ yield +.25%Treasury / 2 years / 1.25% / 1.35%
Treasury / 5 years / 1.625% / 1.75%
Treasury / 10 years / 2.25% / 2.15%
Treasury / 30 years / 2.75% / 2.80%
2. Suppose that in #1 above you bought the 5 year UST note at the price you computed.
a. If one year later market yields were 1.625%, what is your holding period return on the note?
b. Is it higher or lower than the yield at the time of purchase? Why?
3. Suppose that you can purchase a 10-year zero-coupon note (STRIP) offered by the U.S. Treasury. If the par value is 1000.
a. What is the price if the market yield is 2.15% (use annual compounding)?
b. What would the price be one year later if the market yield remains the same?
c. What is your holding period return for the one-year period?
d. What can you conclude about how you earn a return on a zero-coupon bond over time?
4. Which of the following Treasury notes is the on-the-run issue? How do you know from the data provided?
Maturity / Coupon / Bid / Asked / Chg / Askedyield
6/30/2024 / 2.000 / 100.7813 / 100.7969 / 0.6016 / 1.875
7/31/2024 / 2.125 / 101.5469 / 101.5625 / 0.6094 / 1.882
8/15/2024 / 2.375 / 103.1641 / 103.1797 / 0.6094 / 1.884
8/31/2024 / 1.875 / 99.8672 / 99.8828 / 0.5938 / 1.893
11/15/2024 / 2.250 / 102.2578 / 102.2734 / 0.6094 / 1.910
5. Euro government bond with negative yield
a. How frequently are coupon payments made for Eurobonds?
b. Compute the price of the Belgian 5-year government bond. Use a par value of $1,000.
c. Compute the price of the German 5-year government bond. Use a par value of $1,000.
d. Explain how the investor has a negative yield in (b) if there is a positive coupon.
