Question

Derive the probability distribution of the 1-year HPR on a 30-year U.S. Treasury bond with a coupon of 4.0% if it is currently selling at par and the probability distribution of its yield to maturity a year from now is as shown in the table below. (Assume the entire 4.0% coupon is paid at the end of the year rather than every 6 months. Assume a par value of $100.) (Leave no cells blank - be certain to enter "O" wherever required. Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Economy Capital Gain Price 19.39 Coupon Interest HPR Boom Probability 0.20 0.60 0.20 YTM 11.01% / $ 9.0 % 7.0 % Normal Growth Recession

Answer 1

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| 0 = a = 3 3 4 5 02:57 W ? v 1x ENG 13-02-2020 23 B C D ECONOMY PROB YTM COUPON INTEREST C1 PO = 100 PRICE P1 39.45 49.01 63.17 CAPITAL GAIN P1 - PO -60.55 -50.99 -36.83 BOOM NORMAL GROWTH RECESSION 0.2 0.6 11% 9% 7% HPR [(P1-PO + C1)/PO] -56.55% - 46.99% -32.83% 0.2 4 NOTES 30 YEARS ORIGINAL MATURITY : AFTER A YEAR YEARS TO MATURITY 29 BOOM NORMAL GROWTH RECESSION 14 ECONOMY --- >>> 15 COUPON 16 YTM 17 PRICE 11% 39.45 (=PV(B16, C12,-315,-100)] 9% 49.01 7% 63.17 --->>>[=PV(D16,C12,-D15,-100)] [=PV(C16,C12,-C15,-100)] options BOND portfolio sd excel chiptech