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INV2601 Assignment 02 2025 Semester 2 ANSWERS

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INV2601 Assignment 02 2025 Semester 2 ANSWERS

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INV2601/101/3/2025




Tutorial Letter 101/3/2025
Fundamentals of Investment
INV2601
ASSIGNMENT 02
Semester 2

Department of Finance, Risk Management and
Banking
IMPORTANT INFORMATION
Please register on myUnisa, activate your myLife e-mail account and make sure that you
have regular access to the myUnisa module website, INV2601-2025-S2, as well as
your group website.

, Assignment no Due date Assignment Content
02 23 September 2025 Study units 10 to 14




QUESTION 1

Use the information below to answer the question.

Assume that you are an investment analyst, and you were provided with the information
illustrated in the below table to come up with the 6-month and 12-month spot rate that a
company can use to analyse their returns at the end of the year.


All bonds have a face value of R100 and semi-annual coupon payments.


BONDS MATURITY ANNUAL PRICE YTM
COUPON

A 6 months 7% R100 7%

B 12 months 11% R104.29 6.5%

C 18 months 13% R112.41 4.36%


1. Calculate the equivalent 6-month spot rate and 12-month spot rate using the
bootstrapping method.


6-month spot rate (SR6) = 7%
• The 6-month spot rate will always equal the yield to maturity since the bond will
only make one payment at maturity.
• The 6-month spot rate is therefore 7%. No calculation required.

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