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Exercise 1 from Chapter 20 on pages 367 and 368 of the textbook Amount Issue Price Date of Issue Settlement Date Maturity Coupon Cash Flows Date 125 m 99,731% 2/20/2014 2/20/2014 7 years 5,5% 2/20/2014 0 -99,731% -99,731% 5,547% 99,733% 0% 2/20/2015 1 5,500% 5,211% 2/20/2016 2 5,500% 4,937% 2/20/2017 3 5,500% 4,678% 2/20/2018 4 5,500% 4,432% 0,05 0,09 0,13 0,17 0,20 0,23 4,79 Modified Duration 0,00 5,679 0,05 0,10 0,14 0,18 0,21 0,24 5,06 Duration 0,00 5,994 5,238% 4,989% 4,751% 4,525% 4,309% 78,726% 0,049886621 0,095022136 0,135745908 Cash Flows Discounted Cash Flows Yield to Maturity PV NPV 2/20/2019 2/20/2020 2/20/2021 5 6 7 5,500% 5,500% 105,500% 4,199% 3,978% 72,299% As of 2/21/2015 Discounted cash flows Required yield to maturity PV 5,0% 102,5% 0 Modified duration 5,029 0,172375757 0,2052092 4,4986128 0 Duration 0,052380952 0,099773243 0,142533204 0,180994544 0,2154697 4,7235435 5,281 Analysis: Term to maturity refers to the remaining life of a debt instrument. With bonds, term to maturity is the time between when the bond is issued and when it matures, known as its maturity date, at which time the issuer must redeem the bond by ...
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