Derive the probability distribution of the 1-year HPR on a 30-year U.S. Treasury bond with an...

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Finance

Derive the probability distribution of the 1-year HPR on a30-year U.S. Treasury bond with an 4.0% coupon if it is currentlyselling at par and the probability distribution of its yield tomaturity a year from now is as follows: (Assume the entire 4.0%coupon is paid at the end of the year rather than every 6 months.Assume a par value of $100.) (Leave no cells blank - be certain toenter "0" wherever required. Negative values should be indicated bya minus sign. Do not round intermediate calculations. Round youranswers to 2 decimal places. Omit the "$" & "%" signs in yourresponse.)
Economy
Probability
YTM
Price
Capital Gains
Coupon Interest
HPR
Boom
0.30
10.0%
Normal Growth
.0.40
8.0%
Recession
0.30
6.0%
Please fill in the rest.

Answer & Explanation Solved by verified expert

3.8 Ratings (402 Votes)

The calculation is shown below Price and oneyear HPR for a 30year US Treasury bond with 301 29 years to maturity at years end Using the concept of Present value discounting Price pvratenperpmt fv For Boom Price PV ratenperpmt See Answer

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Derive the probability distribution of the 1-year HPR on a30-year U.S. Treasury bond with an 4.0% coupon if it is currentlyselling at par and the probability distribution of its yield tomaturity a year from now is as follows: (Assume the entire 4.0%coupon is paid at the end of the year rather than every 6 months.Assume a par value of $100.) (Leave no cells blank - be certain toenter "0" wherever required. Negative values should be indicated bya minus sign. Do not round intermediate calculations. Round youranswers to 2 decimal places. Omit the "$" & "%" signs in yourresponse.)EconomyProbabilityYTMPriceCapital GainsCoupon InterestHPRBoom0.3010.0%Normal Growth.0.408.0%Recession0.306.0%Please fill in the rest.

Economy	Probability	YTM	Price	Capital Gains	Coupon Interest	HPR
Boom	0.30	10.0%
Normal Growth	.0.40	8.0%
Recession	0.30	6.0%