Walcotia is a small, recently independent nation in Western Africa. The country has recently launched an ambitious programme to increase educational standards in the country and has issued $100 Mln of Walcottia government bonds to fund the initiative. The bonds pay an annual coupon of 5% and matures
Walcotia is a small, recently independent nation in Western Africa. The country has recently launched an ambitious programme to increase educational standards in the country and has issued $100 Mln of Walcottia government bonds to fund the initiative. The bonds pay an annual coupon of 5% and matures
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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Walcotia is a small, recently independent nation in Western Africa. The country has recently
launched an ambitious programme to increase educational standards in the country and has
issued $100 Mln of Walcottia government bonds to fund the initiative. The bonds pay an
annual coupon of 5% and matures in 4 years
Kai Pascoe, a fixed income analyst at a large fund manager has been asked to review the
bonds as a possible investment opportunity for his firm.
Kai has obtained the following table of annualised spot rates
1 year 3%
2 year 3.5%
3 year 4.5%
4 year 5%
Calculate the price of $100 nominal of the bond using spot rates.
Calculate the yield-to-maturity of the bond.
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