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8/20/2019 Solution to 3rd Problem
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Exercises
One
A bond was issued at Rs 100, 10% coupon annual, 7 years ago.
Total tenor was 1
Its price is Rs 102. What is the T!
Two
A bond was issued a year ago "or Rs 100, 11% coupon se#i annual,
its tenor was 12 yea
and its price today is Rs 10$. What is its T!
Three "or practice
ou inest in the bond in e&ercise two aboe. 'ost
#aturity you inest in another bond
the coupon is 10% "or 10 years. All interi# coupons that you
earn are inested at (%.
The )nal corpus a"ter the second bond #atures is then
inested at *% in a +ot "und
ou will withdraw Rs && "ro# this "und eery year
"or the ne&t 1$ years to #eet your
liing e&penses-. ow #uch is this Rs && that you can
withdraw
Rate2nd /sn solution ash ow ' 3actor 43
$.$ 0.*$117( $.2516705751
$.$ 0.*06757 6.*7(0$1520*
$.$ 0.(0$(6 6.755102755 Rate
$.$ 0.1$6 6.$0201$7726
$.$ 0.77$6 6.222112*(
$.$ 0.760$71 6.075156(02
$.$ 0.706615 5.7627550$$
$.$ 0.(70021 5.($1176$75
$.$ 0.(5750* 5.$0$1*(72($.$ 0.(0(1*5 5.5560(0($2*
$.$ 0.$7($*( 5.17127**161
$.$ 0.$666$ 5.01(66(711*
$.$ 0.$21(( 2.(*17501*2
$.$ 0.6*(1* 2.72*0*7$57
$.$ 0.671*72 2.$*$6$$51
$.$ 0.66*2* 2.6(*1075*$2
$.$ 0.62701 2.56$$(7(11
$.$ 0.60(1(2 2.255*15*2
$.$ 0.5(552 2.1262$2(7*$.$ 0.5(767 2.0210571$
$.$ 0.56*$2* 1.*226071*($
$.$ 0.5526(5 1.2$6617
$.$ 0.51(251 1.75*2721$1
10$.$ 0.5007*2 51.755$50770(
10$.00 10$
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8/20/2019 Solution to 3rd Problem
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1 years
rs
here
$.15% 10$.15% 5rd 8olution Rate (% 5%2 110.$5% oupons hal"
years
$.$ 25 10.$675
$.$ 22 10.$5$7
10.$5% annual $.$ 21 10.251(2
$.$ 20 *.*55(12
$.$ 1* *.(6625
$.$ 1 *.5(552
$.$ 17 *.0*0((2
These coupons are $.$ 1( .2$$
re inested at (% per $.$ 1$ .$(21annu#. $.$ 16 .51*265
$.$ 15 .07(*5$
$.$ 12 7.61($
$.$ 11 7.(152(
$.$ 10 7.5*1$6
$.$ * 7.17(2$5
$.$ (.*(725$
$.$ 7 (.7(650(
$.$ ( (.$(72
$.$ $ (.57(007$.$ 6 (.1*02*
$.$ 5 (.00****
$.$ 2 $.56*$
$.$ 1 $.(($
15.6$(
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8/20/2019 Solution to 3rd Problem
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Total orpus Total Return in coupouns inested at (% 9
last coupon9 )nal bond o" 100 ruppes 1009$.$-
Rate *%
Total orpus 2*.56$( 2(.0611027$7 51$.5(7 5$.*$*
27*.6*0
it is reinested 27*.6*0 2$.1$6171*6 506.(6$ 5$.*$* 2(.76*1
at *% got "und 2(.76*1 26.176172$5 2*2.*5($ 5$.*$* 2$7.060(
2$7.060( 25.155($6(*$ 20.1765 5$.*$* 266.276
266.276 21.*$0$5$07 2((.2(56 5$.*$* 250.5(7$
250.5(7$ 20.75507211 2$1.100( 5$.*$* 21$.2067
21$.2067 1*.5(62$15* 256.$751 5$.*$* 1*.(7751*.(775 17.0*$52*1
21(.$$2 5$.*$* 10.((25
10.((25 1(.2$*(0*7( 1*(.*21* 5$.*$* 1(1.02(
1(1.02( 16.6*2565(75 17$.$16 5$.*$* 15*.(22$
15*.(22$ 12.$((0266*5 1$2.1$ 5$.*$* 11(.2*2(
11(.2*2( 10.6((55($( 12(.7$* 5$.*$* *0.(50
*0.(50 .177(7(7(77 **.0607$ 5$.*$* (5.166(
(5.166( $.(5057$($ (.27* 5$.*$* 52.*5201
52.*5201 2.*(505$7 5$.*$* 5$.*$* *.$*:;015
This alue is set to
