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- Ex. 2 Calculate the combined default risk for company A and B from a combined bond issue of A and B: Company A B Which of the 2 company increased the most its default risk, A or B ? By how much? Bond issue (mn) 80 115 Default options 2% 3%Question 2: Given the interest rate determinants information below: Scenario A Scenario B Average expected inflation (IP) 4% 8% Risk-free rate of return (Rf) 1.75% 3% Default Risk Premium (DRP) 1.1% 0.6% Maturity risk premium (MRP) .008 x (t – 1) .006 x (t – 1) Determine the Nominal interest rate (INOM) on 10 years’ (t) security for both the scenarios to decide whether Scenario A or Scenario B is better.Bond A B Liquidity High High Low D 8 Low Based on the table above, what is the default risk premium? O 0.5% O 1% 01.5% с Maturity 2 8 2 Default Risk Low High High High YTM 3,50% 5.00% 5.50% 18.00%
- 14. There are three securities in the market whose return on market portfolio yield the following results : reg rfood rmrf Source SS df MS Number of obs 516 F (1, 514) 763.49 %3D Model 6355.67324 6355.67324 Prob > F 0.0000 Residual 4278.81044 514 8.32453393 R-squared 0.5976 %3D Adj R-squared 0.5969 Total 10634.4837 515 20.6494829 Root MSE 2.8852 rfood Coef. Std. Err. P>|t| [95% Conf. Interval] rmrf .7834176 .0283526 27.63 0.000 .7277164 .8391188 _cons .3391769 .1275602 2.66 0.008 .0885734 .5897804 i. reg rdur rmrf Source SS df MS Number of obs 516 %3D F (1, 514) 1458.52 %3D Model 12789.402 1 12789.402 Prob > F 0.0000 %3D 4507.13047 R-squared Adj R-squared Residual 514 8.76873633 0.7394 %3D 0.7389 Total 17296.5324 515 33.5854999 Root MSE 2.9612 rdur Coef. Std. Err. P>|t]| [95% Conf. Interval] rmrf 1.111316 .0290992 38.19 0.000 1.054148 1.168484 _cons .063612 .1309193 0.49 0.627 -.1935907 .3208148 ii. reg rcon rmrf Source SS df MS Number of obs 516 F (1, 514) 2096.01 Model 13866.0296 1…A B с E F Investment Opportunity set for stocks and bonds with varios correlation coeffients SD s SDB 19 8 E(rs) 10 Weight in stocks WS -0.1 0.0 0.1 0.2 0.3 0.4 0.6 0.8 1.0 1.1 D E(TB) 5 Portfolio expected return ws(min) = (GB^2 - OBOSP) / (Os^2 + B^2 - 2*0BÚSP) E(rp) = ws(min) *E(rs)+(1-wg(min))*E(rb) = SDp = G -1 Portfolio Standard Deviation for Given Correlation 0 0.2 0.5 H Minimum Variance Portfolio 1Consider the following money market information being quoted: Which of the following statements is true? Particulars GBP Interest Rate THB Interest Rate Spot Rate 1-year Expected Spot Rate Bid Rate 6.100% 10.550% THB5.6601/GBP THB5.9037/GBP C. Ask Rate 6.125% 10.625% THB5.6622/GBP THB5.9961/GBP a. There is an arbitrage which can only be made by initially borrowing GBP and then investing in THB. b. More than one of the options in this question are correct. The THB is selling at a premium to the GBP in the future. O d. There is an arbitrage which can only be made by initially borrowing THB and then investing in GBP.
- What is the value of B8? A Bond Valuation 1 2 Time to Maturity (Periods) 3 Coupon Rate 4 Required Return 5 Frequency 6 Face Value 7 8 Invoice Price 9 An O$741.01 $1,000.00 O $1,008.33 $735.08 B 15 2/3 5.00% 10.00% 2 $ 1,000 ? CBond Current Price Modified Duration A 895.57 4.12257 B 625.95 7.3523 C 884.17 4.04855 Interest rate has increase by 10 basis point calculate by how much the portfolio value will change.Problem 6-1 Financial Pages (LO1) Consider the table given below to answer the following question. Maturity Coupon Bid Price Asked Price Chg Asked Yield toMaturity (%) 15-02-2020 1.375 98.3281 98.3438 − 0.0078 2.228 15-02-2021 2.25 99.5781 99.5938 0.0313 2.391 15-02-2025 7.625 130.6719 130.6875 0.1094 2.770 15-02-2029 5.25 121.8516 121.9141 0.2344 2.908 15-02-2036 4.5 120.9063 120.9688 0.5313 2.986 15-02-2041 4.75 127.2422 127.3047 0.6641 3.084 15-02-2048 3 97.2656 97.2969 0.7266 3.140 a. What is the current yield of the 2.25% 2021 maturity bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
- Securities A B C D E 4 Select one: OA. 2.50% O B. 3.73% OC. 1.98% Expected Standard Return (in %) Deviation of with 4.11 15.55 8.12 8.20 12.50 O D. 2.79% Correlation Beta 19 36.7 10 24.5 14 Returns (in %) Portfolio Market 0.56 0.78 0.42 0.99 The standard deviation of the returns on the market portfolio is 15%, and its expected return is 9.5%. The riskless asset has a return of 2.5%. Which of the following results is closest to the unsystematic risk of a portfolio comprised of 60% of security A and 40% of security B given that the correlation between security A and B (P(A,B)) is 0.4? 0.23 1.37 0.52 0.68 0.929, 6. Assuming annual compounding, what's the YTM of a portfolio with one Bond A and one Bond C? Bond Price CF1 CF2 CF3 A -100 15 15 115 B -100 106 109 -92 I 9 13.31% B 13.41% 13.51% 13.61% E) 13.71%12345 A B C This first table describes prevailing market interest rates. Market Data Yield 0.05 6 7 Required: 8 D E F G H 9 Using the yield above and the information contained in the table below, please calculate the price and duration of the bond as well as all necessary steps. 10 (Use cells A5 to B5 from the given information to complete this question.) 11 12 Time Until Payment Payment Discounted Payment Weight Time x Weight 13 1.00 $30.00 14 2.00 $30.00 15 3.00 $30.00 16 4.00 $1,030.00 17 Price: 18 Duration