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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![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
B
D
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
Total =
$0.00
$0.00
図](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9434198f-cd22-427c-98c0-89541e25e736%2F19ff94db-5cc1-43aa-8203-49f36f4a625c%2Fgpou0ea_processed.png&w=3840&q=75)
Transcribed Image Text: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
B
D
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
Total =
$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 the
three 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 the
price change between parts b and c?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9434198f-cd22-427c-98c0-89541e25e736%2F19ff94db-5cc1-43aa-8203-49f36f4a625c%2F7fw2hdd_processed.png&w=3840&q=75)
Transcribed Image Text:b. Illustrate what happens when the discount rate increases by 0.5%. What do you notice about the changes in price between the
three 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 the
price change between parts b and c?
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