As attached

Case study 02 – Bond valuation and yield curve interpolation

Topic: Structure of interest rates - Interpolation

FNCE 4430 –

Purpose: The purpose of this assignment is for you to value a bond using a yield curve where

you must interpolate missing values.

Directions: Using the Case02_ExcelTemplate, follow the guidelines below to interpolate the

yield curve and complete the bond valuation.

Step 1: Go to https://www.treasury.gov/resource-center/data-chart-center/interest-

rates/pages/textview.aspx?data=yield and fill in the yield curve (blue-font cells in

column C). The date you must use is 09/01/2023.

Step 2: Complete the linear interpolation in column D.

Step 3: Complete the Nelson-Siegel model (as per video in brightspace).

The final step is to find the value of a bond with 12 years to maturity, has an annual coupon

payment and coupon rate of 7%. Par value is $1,000.

Step 4: Fill in cells L16 through W17 with the bond cash flows. Do the same for cells L24

through W24.

Step 5: Using the linear interpolated yield curve, fill in cells L17 through W17. Using the

Nelson-Siegel yield curve, fill in cells L25 through W25. The bond prices will

automatically calculate for you.