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
#queThe opening balance of one of the 31-day billing cycles for Lorenzo''s credit card was $4100, but after 15 days Lorenzo made a payment of $2300 to decrease his balance, and it
Q. What is Cash Credit? A cash credit is an arrangement by which a bank allows his customer to borrow money up to a certain limit against some tangible securities or guarantees
Why do a Split? A 4 x 1 Split is an operation by which a shareholder now owns 4 shares for every share he/she had before. Logically, the stock market value of each of these new
Describe the duties of the financial manager in a business firm? Financial managers evaluate the firm's performance, determine what are the financial consequence will be if the
Question: (a) The key determinants of investment decisions in the public sector are:- legal, political and financial factors. Show the importance of each determinant when de
We have seen the valuation of bonds with embedded option using binomial model. This method can be used when cash flows do not depend on how interest rates evolve.
What happens when a bank charges discount interest on a loan? While a bank charges discount interest on a loan the required interest payment is subtracted from the loan carries o
type of assets for ppt from t.y.bom com student in commerce department in financial management
Case Study: Silicon Cliffs is a big private company that undertakes consultancy activities and services in the field of building construction. Silicon Cliffs has gained peoples
Explain about the liquidity premium theory of the term structure of interest rates. Liquidity premium theory: Liquidity premium theory asserts which, into a world of unce
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