FIN INTERMEDIARIES quiz notes

Vi (H X.) 25) A credit market instrument that pays the owner a fixed coupon payment every year until the maturity date and then repays the face value is called a A) fixed-payment loan. C) simple loan. B) coupon bond. D) discount bond. 25) Pr

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K Assume that a bond will make payments every six months as shown on the following timeline (using six-month periods): 0 2 5 Period $19.53 a. What is the maturity of the bond (in years)? b. What is the coupon rate (as a percentage)? c. What is the face value? Cash Flows View an example Get more help. ★ a. What is the maturity of the bond (in years)? The maturity is years. (Round to the nearest integer.) A 6 1 MacBook Pro & 7 $19.53 * 8 9 C 59 $19.53 60 $19.53+$1,000 Clear all BUB 0 {

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Check my work mode: This shows what is correct or incorrect for the work you have completed so far. It does not indicate com What is the Macaulay duration of a bond with a coupon of 5.4 percent, nine years to maturity, and a current price of $1,055.40? What is the modified duration? Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Answer is complete but not entirely correct. Macaulay Modified Duration 7.410 x Years 7.082 Years

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3. Use the data in the following table on Treasury securities of different maturities to solve this problem: 1 year 2 year Зуеar 1.25% 2% 2.50% Assume that the liquidity premium theory is correct. On this day, what did investors expect the interest rate to be on the one-year Treasury bill two years from that time if the term premium on a two-year Treasury note was 0.20%, and the term premium on a three-year Treasury note was 0.40%?

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Need help with C Approximate yield to maturity   An investor must choose between two bonds:   Bond A pays $90 annual interest and has a market value of $815. It has 15 years to maturity. Bond B pays $81 annual interest and has a market value of $700. It has eight years to maturity.   Assume the par value of the bonds is $1,000.   a. Compute the current yield on both bonds. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Current Yield Bond A11.04% Bond B11.57%   c. A drawback of current yield is that it does not consider the total life of the bond. For example, the approximate yield to maturity on Bond A is 11.51 percent. What is the approximate yield to maturity on Bond B? The exact yield to maturity? (Use the approximation formula to compute the approximate yield to maturity and use the calculator method to compute the exact yield to maturity. Do not round intermediate calculations. Input your answers as a percent rounded to 2…

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The prices of zero-coupon bonds with various maturities are given: maturity in years price 1 975.66 2 885.89 3 821.92 4 759.20 5 670.20 A) How could you construct a 1-year forward loan beginning in year 3? face value = ? rate of synthetic loan = ? B) How could you construct a 1-year forward loan beginning in year 4? face value = ? rate of synthetic loan = ?

Question 5 Suppose that discount bond prices are as follows: see picture a. A customer of your bank wants a forward contract to borrow $20M in three years from now for one year. What would be your quote to the customer? b. How would you confirm the rate? c. If customer accepts your offer, how would you lock-in the cash flows. Is there an arbitrage opportunity available? Show the entire cashflows chart.

Consider the following two Treasury securities: Bond Price Modified duration (years) A $100 6 B $80 7   For a 25 basis-point change in interest rates, which bond has the greatest percentage change in price?   A. Bond A   B. Bond B    C. Can't be determined

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DO not Answer Question 1-6,    Only below question A-C needed.   21. Consider the following balance sheet (in millions) for an FI:               Assets                                     Liabilities Duration = 10 years                $950                                        Duration = 2 years                  $860 Equity                                     $90   What is the FI's duration gap? What is the FI's interest rate risk exposure? How can the FI use futures and forward contracts to put on a macrohedge? What is the impact on the FI's equity value if the relative change in interest rates is an increase of 1 percent?  That is, DR/(1+R) = 0.01. Suppose that the FI in part (c) macrohedges using Treasury bond futures that are currently priced at 96. What is the impact on the FI's futures position if the relative change in all interest rates is an increase of 1 percent? That is, DR/(1+R) = 0.01. Assume that the deliverable Treasury bond has a duration of nine years. If the FI…

Quantitative Problem: Today, interest rates on 1-year T-bonds yield 1.3%, interest rates on 2-year T-bonds yield 2.3%, and interest rates on 3-year T-bonds yield 3.7%. a. If the pure expectations theory is correct, what is the yield on 1-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places. % 1.3 Show All Feedback b. If the pure expectations theory is correct, what is the yield on 2-year T-bonds one year from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places. 2.4 % Show All Feedback c. If the pure expectations theory is correct, what is the yield on 1-year T-bonds two years from now? Be sure to use a geometric average in your calculations. Do not round intermediate calculations. Round your answer to four decimal places. 3.8 Show All Feedback

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