Adequate information Characteristic pertaining to fixed rate note and fixed rate bond Price Fixed Rate Bond Fixed Rate Note Price 107.18 100 YTM 5% 5% Time remaining for maturity 18 8 Duration (Modified) 6.9848 3.5851 To determine: The most optimum strategy amongst the three, lengthen the portfolio duration, buy fixed rate bonds and shorten the portfolio duration. Introduction: Fixed rate bond is one of the kind of debt instrument which comprises of fixed interest (coupon) payment in comparison to floating rate bond. Fixed rate note is generally issued for a long period of time and has a predetermined rate of interest. Duration on the other hand, refers to the measure of price of bond sensitivity with respect to changes in the rate of interest.

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Answer 1

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Chapter 16, Problem 17PS

Summary Introduction

Adequate information

Characteristic pertaining to fixed rate note and fixed rate bond

Price Fixed Rate Bond Fixed Rate Note

Price 107.18 100

YTM 5% 5%

Time remaining for maturity 18 8

Duration (Modified) 6.9848 3.5851

To determine:

The most optimum strategy amongst the three, lengthen the portfolio duration, buy fixed rate bonds and shorten the portfolio duration.

Introduction:

Fixed rate bond is one of the kind of debt instrument which comprises of fixed interest (coupon) payment in comparison to floating rate bond. Fixed rate note is generally issued for a long period of time and has a predetermined rate of interest. Duration on the other hand, refers to the measure of price of bond sensitivity with respect to changes in the rate of interest.

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Answer 2

Question

Chapter 16, Problem 17PS

Summary Introduction

Adequate information

Characteristic pertaining to fixed rate note and fixed rate bond

Price Fixed Rate Bond Fixed Rate Note

Price 107.18 100

YTM 5% 5%

Time remaining for maturity 18 8

Duration (Modified) 6.9848 3.5851

To determine:

The most optimum strategy amongst the three, lengthen the portfolio duration, buy fixed rate bonds and shorten the portfolio duration.

Introduction:

Fixed rate bond is one of the kind of debt instrument which comprises of fixed interest (coupon) payment in comparison to floating rate bond. Fixed rate note is generally issued for a long period of time and has a predetermined rate of interest. Duration on the other hand, refers to the measure of price of bond sensitivity with respect to changes in the rate of interest.

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Answer 3

Question

Chapter 16, Problem 17PS

Summary Introduction

Adequate information

Characteristic pertaining to fixed rate note and fixed rate bond

Price Fixed Rate Bond Fixed Rate Note

Price 107.18 100

YTM 5% 5%

Time remaining for maturity 18 8

Duration (Modified) 6.9848 3.5851

To determine:

The most optimum strategy amongst the three, lengthen the portfolio duration, buy fixed rate bonds and shorten the portfolio duration.

Introduction:

Fixed rate bond is one of the kind of debt instrument which comprises of fixed interest (coupon) payment in comparison to floating rate bond. Fixed rate note is generally issued for a long period of time and has a predetermined rate of interest. Duration on the other hand, refers to the measure of price of bond sensitivity with respect to changes in the rate of interest.

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Answer 4

Question

Chapter 16, Problem 17PS

Summary Introduction

Adequate information

Characteristic pertaining to fixed rate note and fixed rate bond

Price Fixed Rate Bond Fixed Rate Note

Price 107.18 100

YTM 5% 5%

Time remaining for maturity 18 8

Duration (Modified) 6.9848 3.5851

To determine:

The most optimum strategy amongst the three, lengthen the portfolio duration, buy fixed rate bonds and shorten the portfolio duration.

Introduction:

Fixed rate bond is one of the kind of debt instrument which comprises of fixed interest (coupon) payment in comparison to floating rate bond. Fixed rate note is generally issued for a long period of time and has a predetermined rate of interest. Duration on the other hand, refers to the measure of price of bond sensitivity with respect to changes in the rate of interest.

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Answer 5

Chapter 16, Problem 17PS

Summary Introduction

Adequate information

Characteristic pertaining to fixed rate note and fixed rate bond

Price Fixed Rate Bond Fixed Rate Note

Price 107.18 100

YTM 5% 5%

Time remaining for maturity 18 8

Duration (Modified) 6.9848 3.5851

To determine:

The most optimum strategy amongst the three, lengthen the portfolio duration, buy fixed rate bonds and shorten the portfolio duration.

Introduction:

Fixed rate bond is one of the kind of debt instrument which comprises of fixed interest (coupon) payment in comparison to floating rate bond. Fixed rate note is generally issued for a long period of time and has a predetermined rate of interest. Duration on the other hand, refers to the measure of price of bond sensitivity with respect to changes in the rate of interest.

Answer 6

Chapter 16, Problem 17PS

Summary Introduction

Adequate information

Characteristic pertaining to fixed rate note and fixed rate bond

Price Fixed Rate Bond Fixed Rate Note

Price 107.18 100

YTM 5% 5%

Time remaining for maturity 18 8

Duration (Modified) 6.9848 3.5851

To determine:

The most optimum strategy amongst the three, lengthen the portfolio duration, buy fixed rate bonds and shorten the portfolio duration.

Introduction:

Fixed rate bond is one of the kind of debt instrument which comprises of fixed interest (coupon) payment in comparison to floating rate bond. Fixed rate note is generally issued for a long period of time and has a predetermined rate of interest. Duration on the other hand, refers to the measure of price of bond sensitivity with respect to changes in the rate of interest.

Answer 7

Chapter 16, Problem 17PS

Summary Introduction

Adequate information

Characteristic pertaining to fixed rate note and fixed rate bond

Price Fixed Rate Bond Fixed Rate Note

Price 107.18 100

YTM 5% 5%

Time remaining for maturity 18 8

Duration (Modified) 6.9848 3.5851

To determine:

The most optimum strategy amongst the three, lengthen the portfolio duration, buy fixed rate bonds and shorten the portfolio duration.

Introduction:

Fixed rate bond is one of the kind of debt instrument which comprises of fixed interest (coupon) payment in comparison to floating rate bond. Fixed rate note is generally issued for a long period of time and has a predetermined rate of interest. Duration on the other hand, refers to the measure of price of bond sensitivity with respect to changes in the rate of interest.

Answer 8

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Answer 10

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Answer 11

Ch. 16 - Prob. 1PS Ch. 16 - Prob. 2PS Ch. 16 - Prob. 3PS Ch. 16 - Prob. 4PS Ch. 16 - Prob. 5PS Ch. 16 - Prob. 6PS Ch. 16 - Prob. 7PS Ch. 16 - Prob. 8PS Ch. 16 - Prob. 9PS Ch. 16 - Prob. 10PS

Solution Summary: The author explains that fixed rate bonds have a fixed interest (coupon) payment in comparison to floating rate bond. The most optimum strategy is to shorten the portfolio duration.

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Chapter 16 Solutions

Characteristic pertaining to fixed rate note and fixed rate bond
Price	Fixed Rate Bond	Fixed Rate Note
Price	107.18	100
YTM	5%	5%
Time remaining for maturity	18	8
Duration (Modified)	6.9848	3.5851