7-42 Spreadsheet Problem You have a portfolio of three bonds. The long bond will mature in 19 years and has a 5.5%coupon rate. The midterm bond matures in 9 years and has a 6.6% coupon rate. The short bond matures in only 2 years and has a4% coupon rate.a. Construct a spreadsheet that shows the value of these three bonds and the portfolio when the discount rate is 5%. Thespreadsheet can look something like this:ABDE1NowChange to2 Interest rate =5.00%5.50%3 BondsBond Price Now Price After Change Change in $ Change in %4 Long bond5 Midterm bond6 Short bond7Total =$0.00$0.00図 b. Illustrate what happens when the discount rate increases by 0.5%. What do you notice about the changes in price between thethree bonds?c. Show the bond prices when the discount rate decreases by 0.5% from the discount rate in part a. What do you notice about theprice change between parts b and c?

Bond price: Bond price is the present value of coupon amount and face value of the bond at a given…

7-42 Spreadsheet Problem You have a portfolio of three bonds. The long bond will mature in 19 years and has a 5.5% coupon rate. The midterm bond matures in 9 years and has a 6.6% coupon rate. The short bond matures in only 2 years and has a 4% coupon rate. a. Construct a spreadsheet that shows the value of these three bonds and the portfolio when the discount rate is 5%. The spreadsheet can look something like this: A E 1 Now Change to 2 Interest rate = 5.00% 5.50% 3 Bonds Bond Price Now Price After Change Change in $ Change in % 4 Long bond 5 Midterm bond 6 Short bond

7-42 Spreadsheet Problem You have a portfolio of three bonds. The long bond will mature in 19 years and has a 5.5% coupon rate. The midterm bond matures in 9 years and has a 6.6% coupon rate. The short bond matures in only 2 years and has a 4% coupon rate. a. Construct a spreadsheet that shows the value of these three bonds and the portfolio when the discount rate is 5%. The spreadsheet can look something like this: A E 1 Now Change to 2 Interest rate = 5.00% 5.50% 3 Bonds Bond Price Now Price After Change Change in $ Change in % 4 Long bond 5 Midterm bond 6 Short bond

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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