09 Oct Bond valuation and yield curve interpolation Topic: Structure of interest rates – Interpolation FNCE – Purpose: The purpose of this assignment is for you to
Case study 02 – Bond valuation and yield curve interpolation Topic: Structure of interest rates – Interpolation FNCE –
Purpose: The purpose of this assignment is for you to value a bond using a yield curve where you must interpolate missing values.
Directions: Using the Case02_ExcelTemplate, follow the guidelines below to interpolate the yield curve and complete the bond valuation.
Step 1: Go to https://www.treasury.gov/resource-center/data-char… and fill in the yield curve (blue-font cells in column C). The date you must use is 09/01/2023.
Step 2: Complete the linear interpolation in column D.
Step 3: Complete the Nelson-Siegel model (as per video in brightspace). The final step is to find the value of a bond with 12 years to maturity, has an annual coupon payment and coupon rate of 7%. Par value is $1,000.
Step 4: Fill in cells L16 through W17 with the bond cash flows. Do the same for cells L24 through W24.
Step 5: Using the linear interpolated yield curve, fill in cells L17 through W17. Using the Nelson-Siegel yield curve, fill in cells L25 through W25. The bond prices will automatically calculate for you.
Template to fill in
| As of 9/1/2023 | ||||||||||||||||||||||
| ttm (years) | Treasury yield | Linear Interpolation | Nelson-Siegel model | Squared residual for N-S | ||||||||||||||||||
| 1 | 0.12% | 0.12% | 0.0000 | alpha1 | 1 | |||||||||||||||||
| 2 | 0.13% | 0.13% | 0.0000 | alpha2 | 1 | |||||||||||||||||
| 3 | 0.14% | 0.14% | 0.0000 | alpha3 | 1 | |||||||||||||||||
| 4 | beta | 2 | ||||||||||||||||||||
| 5 | 0.26% | 0.26% | 0.0000 | |||||||||||||||||||
| 6 | Sum of squared residuals | 0.00042774 | ||||||||||||||||||||
| 7 | 0.46% | 0.46% | 0.0000 | |||||||||||||||||||
| 8 | ||||||||||||||||||||||
| 9 | ||||||||||||||||||||||
| 10 | 0.68% | 0.68% | 0.0000 | |||||||||||||||||||
| 11 | ||||||||||||||||||||||
| 12 | Linear model | |||||||||||||||||||||
| 13 | Period (annual) | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | |||||||||
| 14 | Bond Cash flows | |||||||||||||||||||||
| 15 | Discount Rate | |||||||||||||||||||||
| 16 | Present Value | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||
| 17 | ||||||||||||||||||||||
| 18 | Bond Price | $ – 0 | ||||||||||||||||||||
| 19 | ||||||||||||||||||||||
| 20 | 1.20% | 1.20% | 0.0001 | NS model | ||||||||||||||||||
| 21 | Period (annual) | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | |||||||||
| 22 | Bond Cash flows | |||||||||||||||||||||
| 23 | Discount Rate | |||||||||||||||||||||
| 24 | Present Value | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||
| 25 | ||||||||||||||||||||||
| 26 | Bond Price | $ – 0 | ||||||||||||||||||||
| 27 | ||||||||||||||||||||||
| 28 | ||||||||||||||||||||||
| 29 | ||||||||||||||||||||||
| 30 | 1.43% | 1.43% | 0.0002 |
,
Case study 02 – Bond valuation and yield curve interpolation
Topic: Structure of interest rates – Interpolation
FNCE 4430 –
Purpose: The purpose of this assignment is for you to value a bond using a yield curve where
you must interpolate missing values.
Directions: Using the Case02_ExcelTemplate, follow the guidelines below to interpolate the
yield curve and complete the bond valuation.
Step 1: Go to https://www.treasury.gov/resource-center/data-chart-center/interest-
rates/pages/textview.aspx?data=yield and fill in the yield curve (blue-font cells in
column C). The date you must use is 09/01/2023.
Step 2: Complete the linear interpolation in column D.
Step 3: Complete the Nelson-Siegel model (as per video in brightspace).
The final step is to find the value of a bond with 12 years to maturity, has an annual coupon
payment and coupon rate of 7%. Par value is $1,000.
Step 4: Fill in cells L16 through W17 with the bond cash flows. Do the same for cells L24
through W24.
Step 5: Using the linear interpolated yield curve, fill in cells L17 through W17. Using the
Nelson-Siegel yield curve, fill in cells L25 through W25. The bond prices will
automatically calculate for you.
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.