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    Bond Price

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    nrao123
    The document presents information on term structure, including spot yields and zero prices for bonds maturing in 1 to 15 years. It also shows a hypothetical term structure graph plotting the yields against time to maturity. Additional sections analyze the pricing of a 12% coupon bond, calculation of forward rates from the term structure, and binomial tree models for pricing callable and non-callable bonds.

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    Attribution Non-Commercial (BY-NC)
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    Bond Price

    Uploaded by

    nrao123
    28 views6 pages
    The document presents information on term structure, including spot yields and zero prices for bonds maturing in 1 to 15 years. It also shows a hypothetical term structure graph plotting the yields against time to maturity. Additional sections analyze the pricing of a 12% coupon bond, calculation of forward rates from the term structure, and binomial tree models for pricing callable and non-callable bonds.

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    BondPrice

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    The document presents information on term structure, including spot yields and zero prices for bonds maturing in 1 to 15 years. It also shows a hypothetical term structure graph plotting the yields against time to maturity. Additional sections analyze the pricing of a 12% coupon bond, calculation of forward rates from the term structure, and binomial tree models for pricing callable and non-callable bonds.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    28 views6 pages

    Bond Price

    Uploaded by

    nrao123
    The document presents information on term structure, including spot yields and zero prices for bonds maturing in 1 to 15 years. It also shows a hypothetical term structure graph plotting the yields against time to maturity. Additional sections analyze the pricing of a 12% coupon bond, calculation of forward rates from the term structure, and binomial tree models for pricing callable and non-callable bonds.

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    You are on page 1of 6

    Term Structure

    Term Spot Yield Zero Price


    t R(0,t) B(0,t) Term Structure
    1 5.36% $ 0.94916
    2 5.68% $ 0.89541 9.00%
    3 5.97% $ 0.84030
    4 6.24% $ 0.78508 8.50%
    5 6.48% $ 0.73068
    8.00%
    6 6.70% $ 0.67784
    7 6.89% $ 0.62706 7.50%
    8 7.08% $ 0.57870
    9 7.24% $ 0.53298 7.00%
    10 7.39% $ 0.49001
    6.50%
    11 7.53% $ 0.44983
    12 7.66% $ 0.41241 6.00%
    13 7.78% $ 0.37769
    14 7.89% $ 0.34557 5.50%
    15 7.98% $ 0.31592
    5.00%
    1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

    Term to Maturity

    Page 1
    Term Structure

    12 13 14 15

    Page 2
    Bond Coupon 12.00%
    Bond Price 86 15/16
    Static Spread 6.82%
    Spread Adj Spread Adj
    Term Spot Yield Zero Price Zero Price Cash Present
    t R(0,t) B(0,t) B*(0,t) Flow Value
    1 5.36% $ 0.94916 $ 0.89147 $ 12.00 $ 10.69769
    2 5.68% $ 0.89541 $ 0.79018 $ 12.00 $ 9.48210
    3 5.97% $ 0.84030 $ 0.69696 $ 12.00 $ 8.36350
    4 6.24% $ 0.78508 $ 0.61216 $ 12.00 $ 7.34596
    5 6.48% $ 0.73068 $ 0.53576 $ 12.00 $ 6.42911
    6 6.70% $ 0.67784 $ 0.46745 $ 12.00 $ 5.60943
    7 6.89% $ 0.62706 $ 0.40678 $ 12.00 $ 4.88141
    8 7.08% $ 0.57870 $ 0.35319 $ 12.00 $ 4.23832
    9 7.24% $ 0.53298 $ 0.30607 $ 12.00 $ 3.67288
    10 7.39% $ 0.49001 $ 0.26480 $ 12.00 $ 3.17762
    11 7.53% $ 0.44983 $ 0.22877 $ 12.00 $ 2.74526
    12 7.66% $ 0.41241 $ 0.19741 $ 12.00 $ 2.36886
    13 7.78% $ 0.37769 $ 0.17016 $ 12.00 $ 2.04195
    14 7.89% $ 0.34557 $ 0.14655 $ 12.00 $ 1.75859
    15 7.98% $ 0.31592 $ 0.12612 $ 112.00 $ 14.12508
    Theoretical price $ 86.93776
    Price spread $ 0.00026
    Forward Rates

    Term Structure (hypothetical)

    Term Spot Yield Zero Price Forward Rate


    t R(0,t) B(0,t) r(t)
    1 5.36% $ 0.94916 5.36%
    2 5.68% $ 0.89541 6.00%
    3 5.97% $ 0.84030 6.56%
    4 6.24% $ 0.78508 7.03%
    5 6.48% $ 0.73068 7.44%
    6 6.70% $ 0.67784 7.80%
    7 6.89% $ 0.62706 8.10%
    8 7.08% $ 0.57870 8.36%
    9 7.24% $ 0.53298 8.58%
    10 7.39% $ 0.49001 8.77%
    11 7.53% $ 0.44983 8.93%
    12 7.66% $ 0.41241 9.07%
    13 7.78% $ 0.37769 9.19%
    14 7.89% $ 0.34557 9.30%
    15 7.98% $ 0.31592 9.38%

    Page 4
    Binomial Tree (nc)

    Binomial Tree Pricing, Noncallable Bond

    Interest Rate Volatility


    Volatility 10%
    Forward Rate Tree
    Date r(t,t+1)
    0 5.36%
    1 6.00% 7.33%
    2 6.56% 8.01% 9.78%
    3 7.03% 8.59% 10.49% 12.82%

    Theoretical Bond Price, Noncallable Bond


    Maturity Date 4
    Coupon 7.25%
    Bond Value Tree
    Date
    0 $ 6.88
    1 $ 7.25 $ 7.25

    0 $ 6.45
    1 $ 6.84 $ 6.75
    2 $ 7.25 $ 7.25 $ 7.25

    0 $ 5.97
    1 $ 6.38 $ 6.20
    2 $ 6.80 $ 6.71 $ 6.60
    3 $ 7.25 $ 7.25 $ 7.25 $ 7.25

    0 $ 80.58
    1 $ 86.80 $ 82.99
    2 $ 93.36 $ 90.65 $ 87.50
    3 $ 100.20 $ 98.76 $ 97.06 $ 95.06
    4 $ 107.25 $ 107.25 $ 107.25 $ 107.25 $ 107.25

    Date 0 Sum $ 99.88

    Option Adjusted Spread, Noncallable Bond


    Maturity Date 4
    Coupon 7.25%
    Bond's Market Price $ 90.00
    OAS 3.16%
    Bond Value Tree
    Date
    0 $ 90.00
    1 $ 99.47 $ 95.85
    2 $ 101.96 $ 99.39 $ 96.39
    3 $ 104.58 $ 103.23 $ 101.62 $ 99.73
    4 $ 107.25 $ 107.25 $ 107.25 $ 107.25 $ 107.25
    Theoretical Value minus Market Price $ 0.00

    Page 5
    Binomial Tree (c)

    Binomial Tree Pricing, Callable Bond

    Interest Rate Volatility


    Volatility 10%
    Forward Rate Tree
    Date r(t,t+1)
    0 5.36%
    1 6.00% 7.33%
    2 6.56% 8.01% 9.78%
    3 7.03% 8.59% 10.49% 12.82%

    Theoretical Bond Price, Callable Bond


    Maturity Date 4
    Coupon 7.25%
    Bond Value Tree
    Date
    0 $ 99.84
    1 $ 107.18 $ 103.20
    2 $ 107.25 $ 104.62 $ 101.36
    3 $ 107.25 $ 106.01 $ 104.31 $ 102.31
    4 $ 107.25 $ 107.25 $ 107.25 $ 107.25 $ 107.25

    Option Adjusted Spread, Callable Bond


    Maturity Date 4
    Coupon 7.25%
    Bond's Market Price $ 90.00
    OAS 5.78%
    Bond Value Tree
    Date
    0 $ 90.00
    1 $ 93.62 $ 90.31
    2 $ 97.75 $ 95.35 $ 92.56
    3 $ 102.32 $ 101.02 $ 99.49 $ 97.68
    4 $ 107.25 $ 107.25 $ 107.25 $ 107.25 $ 107.25
    Theoretical Value minus Market Price $ 0.00

    Page 6

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