Bond Project FIN 445

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Running head: FINANCE1Bond ProjectFIN 445NameInstitutionBOND PROJECT FIN 445[15 points]First, calculate the value of a corporate bond using the information below.Do this calculation by hand and show all of your work!Second, convert the value toprice; round to 3decimals.Settlement Date:5/15/2016Maturity Date:5/15/2018Coupon rate:4.50%UST Yield:2.25%

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FINANCE2Spread (bps):125UST Yield =𝐶/𝐹Where C = Annual interest receivedF = Face value of the bond0.0225=1.25𝐵𝐹=1.250.0225𝐹=55.556𝐵=𝐶[1−(1+𝑟)−𝑛]𝑟+𝐹(1+𝑟)𝑛1.25[1−(1+0.045)−2]0.045+55.556(1+0.045)22.34+50.87=53.22Yield to Maturity:Calculate from Above Information𝑌=𝐶+(𝐹−𝐵)/𝑛(𝐹+𝐵)/2=1.25+(55.56−53.22)/2(55.56+53.22)/2

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FINANCE3=2.4254.39=0.04=4%[15 points]Calculate on paper (a) the Macaulay duration and (b) the modifiedduration.Show all of your work.𝑀𝑎𝑐𝑎𝑢𝑙𝑎𝑦𝑑𝑢𝑟𝑎𝑡𝑖𝑜𝑛=∑𝑡×𝐶(1×𝑌)𝑡+𝑛×𝑀(1+𝑦)𝑛𝑛𝑡=2𝐶𝑢𝑟𝑟𝑒𝑛𝑡𝑏𝑜𝑛𝑑𝑝𝑟𝑖𝑐𝑒=2×0.045(1×1.25)2+2×55.56(1+1.25)253.22=0.6+21.9553.2222.5553.22=0.42

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