Price of the Bond and Yield to Maturity
Autor: Kennedy Melly • October 11, 2016 • Research Paper • 957 Words (4 Pages) • 838 Views
Question one; Bond pricing
Price of the bond and Yield to maturity (YTM)
Treasury Bonds | ||||||||
Code | Coupon | Maturity (years) | Face value | Interest | Present value of interest payment | Present value of the bond | Bond price | YTM |
GSBC17 | 6.00% | 0.50 | 100 | 6 | 5.83 | 99.14 | 104.97 | 8% |
GSBM17 | 4.25% | 1.00 | 100 | 4.25 | 4.08 | 98.42 | 102.50 | 6% |
GSBA18 | 5.50% | 1.50 | 100 | 5.5 | 5.08 | 97.49 | 102.57 | 7% |
GSBS18 | 3.25% | 2.00 | 100 | 3.25 | 3.05 | 96.92 | 99.97 | 5% |
GSBE19 | 5.25% | 2.50 | 100 | 5.25 | 4.62 | 96.04 | 100.66 | 7% |
GSBS19 | 2.75% | 3.00 | 100 | 2.75 | 2.54 | 95.43 | 97.96 | 4% |
GSBG20 | 4.50% | 3.50 | 100 | 4.5 | 3.86 | 94.46 | 98.32 | 6% |
GSBU20 | 1.75% | 4.00 | 100 | 1.75 | 1.63 | 93.70 | 95.33 | 3% |
GSBI21 | 5.75% | 4.50 | 100 | 5.75 | 4.47 | 94.03 | 98.50 | 7% |
GSBM22 | 5.75% | 5.00 | 100 | 5.75 | 4.35 | 91.09 | 95.44 | 8% |
GSBG23 | 5.50% | 5.50 | 100 | 5.5 | 4.10 | 89.78 | 93.88 | 8% |
GSBG24 | 2.75% | 6.00 | 100 | 2.75 | 2.34 | 88.46 | 90.80 | 5% |
GSBG25 | 3.25% | 6.50 | 100 | 3.25 | 2.64 | 89.09 | 91.73 | 5% |
GSBG26 | 4.25% | 7.00 | 100 | 4.25 | 3.18 | 86.16 | 89.34 | 7% |
GSBG27 | 4.75% | 7.50 | 100 | 4.75 | 3.35 | 85.26 | 88.62 | 7% |
GSBU27 | 2.75% | 8.00 | 100 | 2.75 | 2.21 | 83.68 | 85.89 | 5% |
GSBI28 | 2.25% | 8.50 | 100 | 2.25 | 1.86 | 82.88 | 84.74 | 5% |
GSBG29 | 3.25% | 9.00 | 100 | 3.25 | 2.44 | 83.37 | 85.81 | 6% |
GSBG33 | 4.50% | 9.50 | 100 | 4.5 | 2.96 | 77.57 | 80.54 | 8% |
GSBK35 | 2.75% | 10.00 | 100 | 2.75 | 2.10 | 75.51 | 77.61 | 6% |
GSBG37 | 3.75% | 10.50 | 100 | 3.75 | 2.55 | 73.61 | 76.16 | 7% |
GSBK39 | 3.25% | 11.00 | 100 | 3.25 | 2.29 | 71.65 | 73.94 | 7% |
An arbitrage portfolio
Coupon | Maturity (years) | Face value | Interest | Present value of interest payment | Present value of the bond | Bond price | YTM | Maturity (years) | Zero-Coupon Yields | ||
GSBC17 | 6.00% | 0.50 | 100 | 6 | 5.83 | 97.13 | 102.96 | 12% | 0.50 | 1.742% | 296.10 |
GSBM17 | 0.0425 | 1 | 100 | 4.25 | 4.076738609 | 98.41839519 | 102.4951338 | 6% | 1 | 0.016070215 | 1736.63 |
GSBA18 | 0.055 | 1.5 | 100 | 5.5 | 5.075560397 | 97.49059576 | 102.5661562 | 7% | 1.5 | 0.017087188 | 5203.98 |
GSBS18 | 0.0325 | 2 | 100 | 3.25 | 3.04861962 | 96.91957863 | 99.96819825 | 5% | 2 | 0.015767332 | 41885.26 |
The arbitrage strategy is to buy zeros with bond price of $102.096 and 98.72 and respective
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