Amit sir pls help with question 12

[vandita24x7]

[Spiti]

Is the answer for 11 d?

[Dreyfus]

I m getting x as 4.76% nd for 11th Rs.2000

[vandita24x7]

Yes 11d
Also question 12 is damn easy.. i dnt knw y m nt getting.
Vaibhav maybe ur right. Show ur working

vandita

On 1 May 2014 19:22, "Vaibhav Garg [via Discussion forum]" <[hidden email]> wrote:

I m getting x as 4.76% nd for 11th Rs.2000

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[Dreyfus]

Bond holder will be indifferent only when the payoff today.i.e. current market price is exactly equal to the payoff associated with the bond by selling it at the end of next year.
The payoff from the bond if sold at the end of next year = the coupon + the market price
→100 + 2000=2100
Now this 2100 is also equal to the bond's  market price when sold at the end of current year
Using this.....2100=100/x
x=0.0476 or 4.76%

[vandita24x7]

Thanks Vaibhav! I was overthinking...

vandita

On 1 May 2014 20:48, "Vaibhav Garg [via Discussion forum]" <[hidden email]> wrote:

Bond holder will be indifferent only when the payoff today.i.e. current market price is exactly equal to the payoff associated with the bond by selling it at the end of next year.
The payoff from the bond if sold at the end of next year = the coupon + the market price
→100 + 2000=2100
Now this 2100 is also equal to the bond's  market price when sold at the end of current year
Using this.....2100=100/x
x=0.0476 or 4.76%

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