For this homework assignment, you need to use Excel. Once you done, upload your excel file to Blackboard. Do not submit HW4 via email. Part 1 Reading Assignments Read Chapter 7 in the textbook. Read LN7. Part 2 Practical Assignments using Excel Consider a semi-annual coupon bond. Its face value is \$1,000, it bears a 6 percent coupon rate per year and will mature in 2 years. Maturity Period (t) Spot Rates (%) Forward Rates (% XXXXXXXXXXF1 = f(0, XXXXXXXXXXF2 = f(1, XXXXXXXXXXF3 = f(2, XXXXXXXXXXF4 = f(3,4) 1) Compute the bond price using the spot rates (i.e. annual compounding)equation. P = X 4 t=1 Ct (1 + Zt) t where Zt represents a zero rate at time t and Ct is a cash flow at time t. 2) Calculate the respective implied forward rates using the spot rates. 3) Calculate the bond price using the implied forward rates using the following equation. P = C1 (1 + F1) + C2 (1 + F1)(1 + F2) + C3 (1 + F1)(1 + F2)(1 + F3) + C4 (1 + F1)(1 + F2)(1 + F3)(1 + F4) Note that Ft = f(t,t+1) represents a forward rate between t and t XXXXXXXXXXSuppose that the CIR model generates the following binomial interest tree (forward rates) lattice. Calculate the bond price using the backward induction method. t=1 t=2 t=3 t= XXXXXXXXXX XXXXXXXXXX.7 5) Compare all the bond prices and provide your findings FINC 3380 Homework 5 Seungho Baek Due: Thursday, April 23 2020, 6:29 P.M. For this homework assignment, you need to use Excel. Once you done, upload your excel file to Blackboard. Do not submit HW4 via email. Part 1 Reading Assignments Read Chapter 7 in the textbook. Read LN7. Part 2 Practical Assignments using Excel Consider a semi-annual coupon bond. Its face value is \$1,000, it bears a 6 percent coupon rate per year and will mature in 2 years. Maturity Period (t) Spot Rates (%) Forward Rates (%) 0.5 1 0.9 F1 = f(0,1) 1.0 2 1.3 F2 = f(1,2) 1.5 3 1.8 F3 = f(2,3) 2.0 4 2.3 F4 = f(3,4) 1) Compute the bond price using the spot rates (i.e. annual compounding)equation. P = X 4 t=1 Ct (1 + Zt) t where Zt represents a zero rate at time t and Ct is a cash flow at time t. 2) Calculate the respective implied forward rates using the spot rates. 3) Calculate the bond price using the implied forward rates using the following equation. P = C1 (1 + F1) + C2 (1 + F1)(1 + F2) + C3 (1 + F1)(1 + F2)(1 + F3) + C4 (1 + F1)(1 + F2)(1 + F3)(1 + F4) Note that Ft = f(t,t+1) represents a forward rate between t and t + 1. 1 4) Suppose that the CIR model generates the following binomial interest tree (forward rates) lattice. Calculate the bond price using the backward induction method. t=1 t=2 t=3 t=4 0.90 2.2 4.9 8.7 1.8 2.8 5.0 1.6 2.9 1.7 5) Compare all the bond prices and provide your findings. 2

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.