3. Third Avenue Railroad Company First Gold 5s were bonds (issued by the Third Avenue Railroad Company) that matured on 1 July 1937. They paid coupons on 1 July and 1 January. We observe the following prices Date 30 June 1937 31 December 1936 31 August 1936 31 May 1936 31 December 1935 31 January 1935 31 May 1934 31 March 1933 31 March 1932 31 July 1931 31 March 1931 31 January 1931 30 September 1930 31 July 1930 31 May 1929 30 June 1928 31 January 1928 31 December 1927 31 August 1927 31 May 1927 Price 89 101 102.75 102.75 100.25 101.625 i. 31 May 1927, ii. 31 July 1931, iii. 30 June 1937. 98.5 87 90 100 95.25 98 97.375 96 91 99.5 100.5 99.75 99 99.75 Credit rating Baa Baa Baa Baa Baa Baa Baa Baa Baa Baa A A A A Aa Aa Aa Aa The bond had accrued interest calculated using US 30/360 (it was a cor- porate bond in the U.S.). i. 31 May 1927 to 31 July 1931? ii. 31 July 1931 to 30 June 1937? Aa (a) Use the YIELD command in excel to calculate the bond's yield to maturity on each of the dates. Aa (b) How is the bond's yield to maturity related to its credit rating? (c) What is happening on 30 June 1937? (d) Calculate the dirty price (including accrued interest) on (f) What was the effective annual return for i. 31 May 1927 to 31 July 1931? ii. 31 July 1931 to 30 June 1937? Hint: you may find the ACCRINT command in excel useful here. (e) What was the holding period return for an investor who held the bond from
3. Third Avenue Railroad Company First Gold 5s were bonds (issued by the Third Avenue Railroad Company) that matured on 1 July 1937. They paid coupons on 1 July and 1 January. We observe the following prices Date 30 June 1937 31 December 1936 31 August 1936 31 May 1936 31 December 1935 31 January 1935 31 May 1934 31 March 1933 31 March 1932 31 July 1931 31 March 1931 31 January 1931 30 September 1930 31 July 1930 31 May 1929 30 June 1928 31 January 1928 31 December 1927 31 August 1927 31 May 1927 Price 89 101 102.75 102.75 100.25 101.625 i. 31 May 1927, ii. 31 July 1931, iii. 30 June 1937. 98.5 87 90 100 95.25 98 97.375 96 91 99.5 100.5 99.75 99 99.75 Credit rating Baa Baa Baa Baa Baa Baa Baa Baa Baa Baa A A A A Aa Aa Aa Aa The bond had accrued interest calculated using US 30/360 (it was a cor- porate bond in the U.S.). i. 31 May 1927 to 31 July 1931? ii. 31 July 1931 to 30 June 1937? Aa (a) Use the YIELD command in excel to calculate the bond's yield to maturity on each of the dates. Aa (b) How is the bond's yield to maturity related to its credit rating? (c) What is happening on 30 June 1937? (d) Calculate the dirty price (including accrued interest) on (f) What was the effective annual return for i. 31 May 1927 to 31 July 1931? ii. 31 July 1931 to 30 June 1937? Hint: you may find the ACCRINT command in excel useful here. (e) What was the holding period return for an investor who held the bond from
Database System Concepts
7th Edition
ISBN:9780078022159
Author:Abraham Silberschatz Professor, Henry F. Korth, S. Sudarshan
Publisher:Abraham Silberschatz Professor, Henry F. Korth, S. Sudarshan
Chapter1: Introduction
Section: Chapter Questions
Problem 1PE
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