Questions
Content
Q2. Assume the LIBOR rate is the same as the Treasury yield curve in Exhibit 1. What is the
current price of the LIBOR floating rate bond that pays its coupon according to 6 month LIBOR
rate, par value $100, and has two years to maturity? If there is not an exactly corresponding
interest rate, you should use extrapolation method. Also, calculate yield-to-maturity (YTM) of
the bond.
Q5. What is the Macaulay duration of 7.29% coupon rate bond in Q1? What is the Macaulay
duration of 6 month LIBOR bond in Q2? What is the Macaulay duration of the inverse floater
in Q3? Use Treasury Rates for this question. (Hint: When calculating the duration of inverse
floater use the fact that floater and inverse floater combined is similar to 7.29% fixed rate
bond.)
current price of the LIBOR floating rate bond that pays its coupon according to 6 month LIBOR
rate, par value $100, and has two years to maturity? If there is not an exactly corresponding
interest rate, you should use extrapolation method. Also, calculate yield-to-maturity (YTM) of
the bond.
Q5. What is the Macaulay duration of 7.29% coupon rate bond in Q1? What is the Macaulay
duration of 6 month LIBOR bond in Q2? What is the Macaulay duration of the inverse floater
in Q3? Use Treasury Rates for this question. (Hint: When calculating the duration of inverse
floater use the fact that floater and inverse floater combined is similar to 7.29% fixed rate
bond.)
