q1spr12

pdf

School

University of Pennsylvania *

*We aren’t endorsed by this school

Course

238

Subject

Economics

Date

Nov 24, 2024

Type

pdf

Pages

Uploaded by blochjacob

FIRST QUIZ FNCE 238/738 January 30, 2012 WRITE ALL ANSWERS ON THE TEST. IF YOUR ANSWER CONTINUES ON THE BACK, MAKE A NOTE OF IT ON THE FRONT. 30 PTS / 25 MINUTES NAME:_____________________________________________ SECTION (10:30, 12, 1:30):__________________________________

1. In homework 1 we saw the following prices for the 9% Treasury bond maturing 11/15/18: Date Bid Ask Bid Yield Ask Yield 1/18/12 151-17 1/8 151-18 3/8 1.129 1.124 1/19/12 150-30 ¼ 150-31+ 1.197 1.192 a. (4 pts) Suppose you bought $5MM principal amount on 1/18/12, and sold it on 1/19/12. Ignoring for the moment accrued interest and financing costs, what would your profit/loss have been on this trade? b. (2 pts) What is the effect of the accrued interest on the profit/loss? (recall that 11/15/11 to 5/15/12 is 182 days, and 11/15/11 to 1/18/12 is 64 days)

c. (4 pts) Suppose you financed the purchase with a repo, where the repo had 1% margin and a 0.25% interest rate. Given this financing, how many dollars would you have had to pay in initially, out of your own pocket, to do this trade, and what effect would the interest expense have on your profit/loss?

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

2. (10 pts) From the December 12, 2011 Barron ’ s: … The NYSE on Nov. 2 proposed a one-year pilot program for a so-called dark pool, to be known as a Retail Liquidity Program, to attract retail order flow for NYSE listings. Currently, most retail "market" orders never make it to any of the 14 stock and options exchanges. The SEC is expected to decide on the proposal by Dec. 15. A verbal schematic is needed here because the SEC in 2007 unintentionally created a market structure resembling a Rube Goldberg cartoon. Brokerage firms such as Schwab and Ameritrade generally contract with broker-dealers to handle the trades of their retail customers. There are some 200 broker-dealers and they pay the retail firms a rebate of about 10 cents for every 100 shares sent their way. The broker-dealers decide if they want to take the other side of a customer's trade. Under the structure decreed by the SEC, they must match the best bid and best offer displayed on the 14 registered stock exchanges, a rule formally known as the National Best Bid and Offer. Sometimes a broker-dealer will offer the customer a better price than the NBBO, but it doesn't have to. A broker-dealer nearly always takes a retail customer's market order because the order is simply asking for the best available price and therefore allows the firm to profit from the full spread between displayed bid and offer. … Why would broker-dealers pay, as outlined here, for the privilege of trading at the current best bid or offer (i.e. ask)?

3. (10 pts) From The Herald , in Zimbabwe, January 19 th , 2012: … There are growing fears that non-performing loans could rise while weakly capitalized banks may not withstand significant loan loss. Analysts added that the proposed US$100 Million fund to strengthen the central bank as the lender of last resort should come as a matter of urgency. One analyst said the banking sector has performed well since 2009, given the absence of the lender of last resort. “ The absence of the lender of last resort or functional money market exposes banks to greater liquidity risks, ” he said. In addition, a transitory deposits base makes it difficult to on-lend on a long-term basis. … How does the strengthening of the Central Bank relate to long-term lending in Zimbabwe? Explain.

Related Documents

Capture 2.PNG

Screenshot 2023-08-16 140406.png

BUSN 6031 Study.docx

Graduate Response.docx

NIOMY MGS 3035.edited.docx

Economic5.docx

Ga state license practice exam (16).pdf

Alexander Delacruz - Inequality Unit - part 5.pdf

9130 - problem set 4 - fall23 (1).docx

Economics2 Multiple Questions.docx

05-02_task1.docx

A Lorenz curve - Copy.edited.edited.docx

Recommended textbooks for you

Microeconomics: Principles & Policy

Economics

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:Cengage Learning

Principles of Economics 2e

Economics

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:OpenStax

Brief Principles of Macroeconomics (MindTap Cours...

Economics

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:Cengage Learning

Essentials of Economics (MindTap Course List)

Economics

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:Cengage Learning

Microeconomics A Contemporary Intro

Economics

ISBN:9781285635101

Author:MCEACHERN

Publisher:Cengage

Economics Today and Tomorrow, Student Edition

Economics

ISBN:9780078747663

Author:McGraw-Hill

Publisher:Glencoe/McGraw-Hill School Pub Co

SEE MORE TEXTBOOKS

Recommended textbooks for you

Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning
Principles of Economics 2e
Economics
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:OpenStax
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Microeconomics A Contemporary Intro
Economics
ISBN:9781285635101
Author:MCEACHERN
Publisher:Cengage
Economics Today and Tomorrow, Student Edition
Economics
ISBN:9780078747663
Author:McGraw-Hill
Publisher:Glencoe/McGraw-Hill School Pub Co