In this question can u explain gow we get 206/200 The issue date is 15 may while the indices are given for sept 06 and march 07 How do we use them? Please someone explain
The bond is issued in 5/07 and the first coupon is 11/07. the coupon is increased by an index that has a time lag of 8 months. So the date of the lagged index for the bond issue is 9/06. The date of the lagged index for the first coupon is 3/07. This lagged index increases from 200 to 206. hence the coupon is increased by 206/200.
How are the coupons from 11/07? Its half yearly..so that means June and Dec.. Oh wait! When they say half yearly we consider the year to begin from the date of issue or purchase? Or the half year of a calender year?
solution in YEARLY format rather than half yearly *URGENT* can somebody please write down the solution of (i)a in Yearly format.I am not able to digest half yearly format. you can solve it in a page and Post a PICTURE of it too. please its very urgent Thank you.
You'd just half the powers. So: \( 2* \left[ \frac{206}{200} v^{½} + \frac{206*1.07^½}{200} v + ...+ \frac{206*1.07^{14½}}{200} v^{15} \right] \) \( + 100*\frac{206}{200} *1.07^{14½} v^{15}\)
what about the "2", wouldn't it become 4 and can u please explain me how did 1.07^{1/2} came. in question its given price index increase CONTINUOUSLY at a rate of 7% so shouldn't it become e^{0.07*t} Thank you.
No, as each coupon payment is still 2. I think the continuous here is referring to the fact that whenever they occur.
