Consider a leveraged 5-year inverse floater that makes annua…

Consider a leveraged 5-year inverse floater that makes annual payments, has an annual tenor, and annual reset dates. The coupon rate at year t is 20% – 2 r1,t-1{“version”:”1.1″,”math”:”r1,t-1″} where r1,t-1{“version”:”1.1″,”math”:”r1,t-1″}is the annually-compounded spot rate on a 1-year STRIPS at year t – 1. Suppose that the yield curve is flat at 5% (continuously compounded). Which of the following is closest to the duration of this leveraged inverse floater? Hint: the leverage here assumes that for every fixed-coupon paying bond, you have two floating rate notes and two zero coupon bonds.

Using the table below showing discount factors, compute the…

Using the table below showing discount factors, compute the yield to maturity on a bond equivalent basis of a bond paying coupons semiannually at the semiannually compounded rate of 3.5%. Assume the bond matures in exactly two years. Hint: Using solver or an associated function is a good step to complete this problem.