arpitasaraswat
New Member
Hi David - I have a question about Tuckman, Chapter 1 - Prices, Discount Factors and Arbitrage, Table 1.5 Replicating Portfolio. This may sound stupid but I wanted to understand the logic behind the calculation of the face amount of the 3 bonds. I have access to your sample spreadsheet so I understand the calculation but am not able to understand the logic. For eg. to calculate the face amount of 4.5% bond, why did Tuckman use 100.375 and discount rate [1+(4.5%/2)]. When you have a min, could you please provide explanation behind the calculation of each of the face amounts? Thanks!