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Question 1. You are given the following spot rates on T0:
Maturity Rate1y 2.5%2y 3.2%3y 3.8%
? Compute the forward rate between year 1 and year 2 (the 1y1y forward rate)? Compute the forward rate between year 2 and year 3 (the 2y1y forward rate)? Compute the forward rate between year 1 and year 3 (the 1y2y forward rate)
Question 2. Consider the following securities
Bond A has a duration of 7 and a price of $100Bond B has a duration of 5 and a price of $110
? Approximate the percent change in the price of Bond A if rates increase by 50bps? Approximate the dollar change in the value of Bond A if rates increase by 50bps? Approximate the dollar change in the value of Bond B if rates increase by 50bps
Question 3. What is the duration of a portfolio invested 50% in 10-year zero coupon bonds and 50% 2-year zero coupon bonds?
Question 4. True or False? Explain your answers:? The yield curve is usually upward sloping because bonds with longer maturities are riskier and investors expect higher returns? A downward sloping yield curve indicates that investors do not expect interest rates to change in the future? Bonds with higher coupons have lower interest rate risk? The duration of a coupon bond with X maturity is always lower than a zero-coupon bond with the same maturity date
You deposit $50,000 now. How much money can you withdraw each year 2-6?
In a recent year more than 70 percent of the people enrolled under Medicare purchased some form of Medicare gap-filling coverage. Why is the coverage necessary? Explain your answer.
Compute the abnormal rates of return for the three stocks listed here: stock A had a return of 11.5% and beta of 0.95
Distinguish a Type I error in predicting default from a Type II error.
Beaksley, Inc. is a very cyclical type of business which is reflected in their dividend policy. The firm pays a $2.00 a share dividend every other year. The last dividend was paid last year. Five years from now, the company is repurchasing all o..
If an investor holds shares of about 20 different businesses all of the risk is eliminated and the portfolio will give a return equal
suppose that you hold a share of stock and a put option on that share. what is the payoff when the option expires if a
Do you agree with her? Please critically comment on this sentence.
The beta of the stock is 1.4. How many futures contract does he have to purchase? If it's a short position, report a negative number.
although she does not report to you you have already begun a series of discussions with the companys management
From the fifth year onwards, dividends are expected to grow at a normal rate of 12% per annum. If the required rate of return of Mr. Tiwari is 14% per annum, do you suggest him to purchase the share at the current price.
interest rate method problems nbspquestion 1. you are in the process of purchasing a new automobile that will cost you
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