ACST2001 S2 2024 Spreadsheet Project Task
In a spreadsheet, create four separate sheets, labelled ‘Part a’, ‘Part b’, ‘Part c’ and ‘Part
d’. Part a to c conffrm some of the results presented to you in week 7, on slide 40-42.
Then answer the following questions
a. On your sheet labelled ‘Part a’ do the following.
Assume each bond has a face value of $100.
Firstly, you are required to price a number of bonds (30 in all). We start by
considering a 4% Treasury bond, maturing in 8 years. Price this bond (in 3
decimal places) at yields to maturity of …, 20% and 22% p.a.
Next consider a 10% Treasury bond, maturing in 8 years. Also price this bond (in
3 decimal places) at yields to maturity of …, 20% and 22% p.a.
Finally, consider a 22% Treasury bond, maturing in 8 years. Also price this bond
(in 3 decimal places) at yields to maturity of , …, 20% and 22%
p.a.
The table below is the recommended format for the 30 bond prices, one value is
given as a check value.
Yield to Maturity
b. On your sheet labelled ‘Part b’ do the following.
Produce one graph of the prices (vertical axis) against yields (horizontal axis) you
calculated above for the three different bonds in part a – that is, all three bond
results should be plotted in the one graph. Price should be the vertical axis of
your graph. Label the three curves you have plotted as ‘4% coupon’, ‘10%
coupon’, and ‘22% coupon’.
c. On your sheet labelled ‘Part c’ do the following.
Consider the move in yield from 0 = 8% to 1 = 6%. By adjusting our
approximate formula for modified duration, calculate the (approximate) duration
(in years) of each of the three Treasury bonds maturing in 8 years we worked with
above (one with 4% coupon, one with 10% coupon, and one with 22% coupon).
Next, consider the move in yield from 0 = 16% to 1 = 18%. Using your formula
above, calculate the (approximate) duration (in years) of each of the three
Treasury bonds maturing in 8 years we worked with above (one with 4% coupon,
one with 10% coupon, and one with 22% coupon).
The approximate formula for modified duration, shown in the week 8 lecture
notes on slide 31. You are not required to calculate the exact duration, but you
need to calculate the approximate duration.
The table below is the recommended format, you can add more columns if
necessary.
8-year
Treasury Bond 0 1
Approximate
Modified Duration
Approximate
Duration
4% coupon 8% 6%
10% coupon 8% 6%
22% coupon 8% 6%
4% coupon 16% 18%
10% coupon 16% 18%
22% coupon 16% 18%
You should also conduct a reasonable check in your documentation.
· If Duration of a coupon paying bond should always be less than the term of the
bond. Are your answers consistent with this statement?
· Compare the Duration of the low coupon bonds to the Duration of higher
coupon bonds. Which bonds have a longer duration? Is this what you expected?
· Compare the Duration of the bonds at low yields to the Duration of the same
bonds at higher yields. When is the Duration longer, at low yields or high yields?
Is this what you expected?
d. On your sheet labelled ‘Part d’ do the following
You need to model the net bond price of a 15 September 2030 Treasury bond
with a coupon rate 2 = 5% p.a. and a face value of $100 that matures at par, the
yield to maturity is 2 = 6%. You should account for a 30% tax on interest and
capital gain, assuming the tax on interest is deferred 6 months, and tax on
capital gain is deferred 12 months.
You are required to create a bond price model that can calculate the net bond
price from 16 March 2024 to 15 September 2024. Your marker would input these
dates in cell B1 (you can start with any dates from 16 March 2024 to 15
September 2024 in cell B1), you are required to determine the net bond price in
cell E1. You can use any Excel cells in ‘part d’ to aid you to calculate your final
answer in cell E1.
You will be awarded with 1 bonus mark if your model can correctly determine the
net bond price after 15 September 2024. More information about the bonus mark
can be found at the end of document.
The deadline for Spreadsheet Project Task (group part) is 1 October 2024, 11:55 PM.
Present your answers to the above questions in a functional Excel spreadsheet (it
should be .xlsx or .xls file), give each solution on a separate sheet (labelled Part a, Part
b, Part c and Part d). Your first page (part a) should also give the name and student id
number of each person in the group. Your spreadsheet should be clearly labelled and
easy to understand. Make sure you identify what the inputs and outputs are for each
worksheet. (You can check week 2 – week 5 practical solution and follow the format for
input and output). You need to include the necessary information, e.g., title, axis title,
etc., in your plot. You need to document and describe your working steps. Note that
uploading a file can take up to 10 or 15 minutes. You need to submit your file at least 20
minutes before the deadline to ensure a successful submission.
Marking break down
1. Formatting and documentation for Part a-d [3 marks]
2. Part a [3 marks]
3. Part b [3 marks]
4. Part c [3 marks]
5. Part d [3 marks + 1 bonus mark]
The maximum mark you can receive for this group project task is 15/15. If you get 14
marks + 1 bonus mark your final mark would be 15/15. If you get 15 marks + 1 bonus
mark your final mark would be 15/15.
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