Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
To value an option-free bond, we must determine the on-the-run yield curve for the particular issuer whose bond we have to value. This on-the-run yield curve used for valuation process is considered as the benchmark interest rates.
Let us consider the following on-the-run issue. The illustration deals with an option-free bond with four years remaining to maturity and a coupon rate of 6.5%.
Maturity
Yield to Maturity (%)
Market Price (in $)
1 year
3.4
100
2 years
3.9
3 years
4.7
4 years
5.0
Each bond is trading at par value i.e., at $100, so the coupon rate is equal to the yield to maturity.
Using the bootstrapping method, the spot rates are determined as follows:
Years
Spot Rates (%)
1
3.3000
2
3.9098
3
4.8120
4
5.0586
Using spot rates, we can calculate the present value of the cash flows.
= $105.374
Duration and Convexity of MBS A graph decpicting the price of the security under study and the interest rates helps in assessing the duratio
What are compensating balances and why do banks require them from some customers? Under what circumstances would banks be most likely to impose compensating balances? Compensati
Push Strategy This is referred for marketing approach in which a manufacturer uses its sales force and trade promotions to sell a product actively to retailers and wholesa
A trade is assessed on the basis of its performance. Performance can be defined as the expected total return over and above the investment horizon of the trade. T
How would you explain economic exposure to exchange risk? Answer: Economic exposure can be illustrated as the opportunity that the firm’s cash flows and so its market value may
Essential of sound capital mix
What are the advantages or benefits of a currency options contract as a hedging tool compared with the forward contract? Answer: The major advantage of by using options contra
Explain official reserve assets and its major components. Answer: Official reserve assets are those financial assets which can be employed as international means of payments.
which type of financing is appropriate to each firm
Exchange Rates The prices at which one country's currency can be changed into that of other country. Although perceptions in the currency markets of the privacy of a count
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd