EE 518 : Homework #11 Due on Wednesday, April 5, 2017

Problem 1
The yield of a semiannual coupon bond with 6% coupon rate and 30 months to maturity is 9%. What are
the price, duration and convexity of the bond?

Problem 2
The yield of a 14 months quarterly coupon bond with 8% coupon rate is 7%. Compute the price, duration
and convexity of the bond.

Problem 3
If the coupon rate of a bond goes up, what can be said about the value of the bond and its duration? Give
a financial argument.

Problem 4
By how much would the price of a ten year zero-coupon bond change if the yield increases by ten basis
points? (One percentage point is equal to 100 basis points. Thus, 10 basis points is equal to 0.001.)

Problem 5
A five year bond with 3.5 years duration is worth 102. What is the value of the bond if the yield decreases
by fifty basis points?

Problem 6
Establish the following relationship between duration and convexity:
D
C = D2 (1)
y

Problem 7
This is a follow-up for last weeks Java exercise.
Use last weeks Airplane class. Create a test class that will do the following:

(a) Create a 52.8 meter airplane with 100 passengers, a 107.5 meter airplane with 130 passengers, a 163.6
meter airplane with 250 passengers, a 45.5 meter airplane with 50 passengers and a 181.0 meter airplane
with 300 passengers.

(b) Retrieve the total length and total number of passengers from the three airplanes and print the sum.

(c) Check if the total number of passengers is less than or equal to 850. If they are, print a Normal number
of passengers message. If not, print a Passengers overboard message.

(d) Create an Arraylist of airplanes and put your airplanes in it. Then, search the Arraylist to find how
many airplanes have at most 150 passengers.

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