《1 Note on Bond Valuation and Returns》.pdf

t 5-205-010 J U L Y 1 9 , 2 0 0 4 s G E O R G E C H A C K O o P E T E R H E C H T V I N C E N T D E S S A I N M O N I K A S T A C H O W I A K P Solutions for Problem Set in r “Note on Bond Valuation and Returns” The problem set from “Note on Bond Valuation and Returns” is repeated below, after which the o solutions are presented. Problem Set y Problem 1. On page 4 in the reading note, we quickly said that equation [3] was a handy shortcut for pricing a bond, and that it could be derived from equation [2]. In other words, we claimed: p ⎛ 1 ⎞ o ⎜ 1− ⎟ n C M ⎜ (1+ y )n ⎟ M P = ∑ t +