Calculate the price of each bond in the following scenarios

Price sensitivity and convexity. It is recommended to use a spreadsheet to solve this problem.

Suppose the US zero-coupon rate curve is given as:

Consider the following three bonds with face value $100:

(a) Calculate the arbitrage price of each bond.

(b) The price sensitivity of a bond (also known as the ‘dollar value of one basis point’ or DV01) is defined

as the change in price when all rates go up 1 basis point (i.e. a +0.01%

parallel shift of the entire zero-coupon rate curve). Compute the price sensitivity of each bond.

(c) Calculate the price of each bond in the following scenarios:

(i) 10 basis point rate increase (+0.10%);

(ii) 1 point rate increase (+1%).

(d) Compare your respective answers to question (c) with:

(i) 10 times the price sensitivity;

(ii) 100 times the price sensitivity.

(e) Based on this comparison, do you think that price sensitivity is a good indicator of the interest rate risk which bonds are exposed to?

(f) (*) Suppose that the zero-coupon rate curve is flat at rate r. Using a second-order Taylor expansion in r, identify a secondary indicator for the interest rate risk of a bond.

find the cost of your paper

prepare witnesses for trial, the paralegal needs to have interviewed the witness prior to trial.

Previously, the emphasis was on obtaining information from clients. In this chapter, the emphasis was on preparing witnesses for trial. To properly prepare witnesses for trial, the paralegal needs to….

Practice the parts of a witness interview that are common to all witness interviews

Practice the parts of a witness interview that are common to all witness interviews: ○ Greeting the client: If the witness comes to the law office, make sure to have….

What is the most likely reason for R.S.’s poor performance in the morning rehabilitation sessions?

SEDATIVE-HYPNOTIC DRUGS Brief History. R.S. is a 34-year-old construction worker who sustained a fracture-dislocation of the vertebral column in an automobile accident. He was admitted to an acute care facility,….