2. Finding the Maturity You've just found a 10 percent coupon bond on the market that sells for par
1 answer:
Answer and Explanation:
The computation of the maturity of the bond is as follows;
When the bond sales at par that means the future value is equivalent to the present value. Also the par value is considered as a future value and we assume the par value be $1,000. Also the coupon rate and the market rate is the same i.e. 10%
Now
Present value = $1,000
Future value = $1,000
PMT = 10% of $1,000 = $100
RATE = 10%
The formula is shown below:
= NPER(RATE;PMT;-PV;FV;TYPE)
The present value comes in negative
After applying the above formula, the maturity would be
As it shows #VALUE so it is not able to find therefore the maturity would be equal to the par value i.e. $1,000
You might be interested in
Answer:
Part a: The portfolio which maximizes the expected return is in the attached file.
Part b:The portfolio's expected rate of return is 11.20% and the weight is 100% for US only.
Explanation:
As the question is incomplete and the data is not available, thus the complete question is found as attached with the solution.
The Sharpe rate is given as
Where
- E_a is the estimated rate of return for a value
- E_r is the risk free rate of return
- σ is the standard deviation of the investment.
The portfolio variance is given as
Where
- σ is the standard deviation of the investment.
- w is the weighted value of the investment
- cv is the covariance term
Portfolio standard deviation is given as
Expected rate is given as
Now the Sharp value is calculated as above.
Now the values as given in the excel sheet are added in the attached excel sheet, following formulas are used to calculate various values
Sharpe ratio is calculated using =(B6-J3)/C6
Portfolio variance is calculated using (=B13^2*C6^2+B14^2*C7^2+B15^2*C8^2+B16^2*C9^2+2*B13*B14*C6*C7*D7+2*B13*B15*C6*C8*D8+2*B13*B16*C6*C9*D9+2*B14*B15*C7*C8*E8+2*B14*B16*C7*C9*E9+2*B15*B16*C8*C9*F9)
Portfolio standard deviation is SQRT(Variance)
Expected return is calculated using =B13*B6+B14*B7+B15*B8+B16*B9
Sharpe is calculated using =(B23-$J$3)/B22
Part a:
The portfolio which maximizes the expected return is in the attached file.
Part b:
The portfolio's expected rate of return is 11.20% and the weight is 100% for US only.
