(a) To examine: The reason due to which price range is greater for the 9 % coupon bond than the floating rate note Introduction: Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term. Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

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Answer 1

Question

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

Chapter 14, Problem 29PS

Summary Introduction

(a)

To examine:

The reason due to which price range is greater for the 9% coupon bond than the floating rate note

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(b)

To examine:

floating rate note is not always sold at par.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(c)

To examine:

The call price for the floating-rate note is of not so much significance to investors.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(d)

To examine:

The probability of call for the fixed rate note is high or low.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(e)

To determine:

Coupon rate to issue the bond at par value where the firm issue a fixed rate note with 15-years maturity which is callable after five years.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(f)

To examine:

The entry for yield to maturity for the floating rate note not appropriate.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

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Citibank is a US Bank which lost US$500 million due to human error in August 2020. Read the case noted in the link below, and answer the following questions: https://finopsinfo.com/investors/citis-900m-blunder-casts-light-on-poor-loan-ops/ Develop a risk management programme appropriate for this case (use attached template) Explain how compliance to this risk management programme can prevent the operation risk issue experienced by Citibank. Discuss the importance of an internal risk assessment and auditing process in relation to this case Step 1 Risks Brief description & how it relates to the case Step 2 List of possible risks Likelihood/Probability of occurrenceH/M/L or Nil Impact (if occurred)H/M/L or Nil What is being done about it now What more can be done about it Dept. where risk exposure exists Step 3 Risk identified Impact (if occurred)H/M/L Probability of occurrenceH/M/L Dept. where risk…

Citibank is a US Bank which lost US$500 million due to human error in August 2020. Read the case noted in the link below, and answer the following questions: https://finopsinfo.com/investors/citis-900m-blunder-casts-light-on-poor-loan-ops/ Develop a risk management programme appropriate for this case (use attached template) Explain how compliance to this risk management programme can prevent the operation risk issue experienced by Citibank. Discuss the importance of an internal risk assessment and auditing process in relation to this case Step 1 Risks Brief description & how it relates to the case Step 2 List of possible risks Likelihood/Probability of occurrenceH/M/L or Nil Impact (if occurred)H/M/L or Nil What is being done about it now What more can be done about it Dept. where risk exposure exists Step 3 Risk identified Impact (if occurred)H/M/L…

Citibank is a US Bank which lost US$500 million due to human error in August 2020. Read the case noted in the link below, and answer the following questions: https://finopsinfo.com/investors/citis-900m-blunder-casts-light-on-poor-loan-ops/ Develop a risk management programme appropriate for this case (use attached template) Explain how compliance to this risk management programme can prevent the operation risk issue experienced by Citibank. Discuss the importance of an internal risk assessment and auditing process in relation to this case

Answer 2

Question

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

Chapter 14, Problem 29PS

Summary Introduction

(a)

To examine:

The reason due to which price range is greater for the 9% coupon bond than the floating rate note

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(b)

To examine:

floating rate note is not always sold at par.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(c)

To examine:

The call price for the floating-rate note is of not so much significance to investors.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(d)

To examine:

The probability of call for the fixed rate note is high or low.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(e)

To determine:

Coupon rate to issue the bond at par value where the firm issue a fixed rate note with 15-years maturity which is callable after five years.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(f)

To examine:

The entry for yield to maturity for the floating rate note not appropriate.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

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Answer 3

Question

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

Chapter 14, Problem 29PS

Summary Introduction

(a)

To examine:

The reason due to which price range is greater for the 9% coupon bond than the floating rate note

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(b)

To examine:

floating rate note is not always sold at par.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(c)

To examine:

The call price for the floating-rate note is of not so much significance to investors.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(d)

To examine:

The probability of call for the fixed rate note is high or low.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(e)

To determine:

Coupon rate to issue the bond at par value where the firm issue a fixed rate note with 15-years maturity which is callable after five years.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(f)

To examine:

The entry for yield to maturity for the floating rate note not appropriate.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

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Answer 4

Question

Definition Definition Financial market that deals in securities or assets that are short-term in nature. The money market is responsible for keeping up the liquidity of the businesses and the organizations. These securities are usually held for a period of 12 months or less and are issued by institutions that require cash or funds for their short-term cash flow requirements. The money market is regulated by the federal government.

Chapter 14, Problem 29PS

Summary Introduction

(a)

To examine:

The reason due to which price range is greater for the 9% coupon bond than the floating rate note

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(b)

To examine:

floating rate note is not always sold at par.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(c)

To examine:

The call price for the floating-rate note is of not so much significance to investors.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(d)

To examine:

The probability of call for the fixed rate note is high or low.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(e)

To determine:

Coupon rate to issue the bond at par value where the firm issue a fixed rate note with 15-years maturity which is callable after five years.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(f)

To examine:

The entry for yield to maturity for the floating rate note not appropriate.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

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Answer 5

Chapter 14, Problem 29PS

Summary Introduction

(a)

To examine:

The reason due to which price range is greater for the 9% coupon bond than the floating rate note

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(b)

To examine:

floating rate note is not always sold at par.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(c)

To examine:

The call price for the floating-rate note is of not so much significance to investors.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(d)

To examine:

The probability of call for the fixed rate note is high or low.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(e)

To determine:

Coupon rate to issue the bond at par value where the firm issue a fixed rate note with 15-years maturity which is callable after five years.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Summary Introduction

(f)

To examine:

The entry for yield to maturity for the floating rate note not appropriate.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Answer 6

Chapter 14, Problem 29PS

Summary Introduction

(a)

To examine:

The reason due to which price range is greater for the 9% coupon bond than the floating rate note

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Answer 7

Chapter 14, Problem 29PS

Summary Introduction

(a)

To examine:

The reason due to which price range is greater for the 9% coupon bond than the floating rate note

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Answer 8

Summary Introduction

(b)

To examine:

floating rate note is not always sold at par.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Answer 9

Summary Introduction

(b)

To examine:

floating rate note is not always sold at par.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Answer 10

Summary Introduction

(c)

To examine:

The call price for the floating-rate note is of not so much significance to investors.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Answer 11

Summary Introduction

(c)

To examine:

The call price for the floating-rate note is of not so much significance to investors.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Answer 12

Summary Introduction

(d)

To examine:

The probability of call for the fixed rate note is high or low.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Answer 13

Summary Introduction

(d)

To examine:

The probability of call for the fixed rate note is high or low.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Answer 14

Summary Introduction

(e)

To determine:

Coupon rate to issue the bond at par value where the firm issue a fixed rate note with 15-years maturity which is callable after five years.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Answer 15

Summary Introduction

(e)

To determine:

Coupon rate to issue the bond at par value where the firm issue a fixed rate note with 15-years maturity which is callable after five years.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Answer 16

Summary Introduction

(f)

To examine:

The entry for yield to maturity for the floating rate note not appropriate.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Answer 17

Summary Introduction

(f)

To examine:

The entry for yield to maturity for the floating rate note not appropriate.

Introduction:

Fixed rate bond: Securities (debt instruments) which have a fixed coupon rate usually which is predetermined. These bonds are usually issued for long term.

Floating rate bond: Securities (debt instruments) which have a floating coupon rate i.e. it keeps on changing with changes in market. It is usually equal to money market reference rate as like LIBOR, MIBOR.

Answer 18

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Answer 19

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Answer 20

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Answer 21

Ch. 14 - Prob. 1PS Ch. 14 - Prob. 2PS Ch. 14 - Prob. 3PS Ch. 14 - Prob. 4PS Ch. 14 - Prob. 5PS Ch. 14 - Prob. 6PS Ch. 14 - Prob. 7PS Ch. 14 - Prob. 8PS Ch. 14 - Prob. 9PS Ch. 14 - Prob. 10PS

Solution Summary: The author explains that fixed rate bonds have a fixed coupon rate which is predetermined and floats with changes in market. The call price for floating-rate notes is not of significance to investors.

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