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BCOR 2200  Fall 2009 Midterm 2 Version 1 with Answers
Dr. David M. Gross
Name (please print):
________________________________________________
Note:
last, first, middle initial
Student ID Number (NOT social security number):
__________________________
You are expected to follow the Honor Code during this Exam and sign below to
acknowledge this.
Honor Code
“On my honor, as a University of Colorado at Boulder student, I have neither given nor
received unauthorized assistance on this work.”
Signature:
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Instructions:
1.
Check your exam to make certain you have
27
questionsall questions are worth the same
value.
2.
Please carefully detach the formula sheet from the back of the exam.
3.
Bubble in your
NAME
, the DATE
DATE
(4/09/09) and your
CU ID
on the answer sheet.
4.
Carefully enter answers on the computergraded answer sheet.
Only answers on the answer
sheet will be scored.
Answers on the question sheets will not be scored.
5.
Please show your student ID to a TA when requested.
6.
You have
60 MINUTES
to complete the exam.
This
INCLUDES
the time needed to enter
your answers on the answer sheet.
7.
When finished,
PLACE YOUR ANSWER SHEET
INSIDE
THE QUESTION SHEETS
8.
Please note:
Baseball hats must be turned backwards; sharing calculators is not allowed; turn
off and do not handle cell phones, pagers, MP3 players, PDA’s….
1
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A $1,000 face value bond with 10 years to maturity has a coupon rate of 5.00%.
The bond makes
semiannual payments and has a YTM 9.00%. Calculate the bond’s price.
a.
$739.84
N = 10 x 2 = 20,
PMT = 0.05/2 = 0.025,
FV = $1,000,
R = 4.50
b.
$743.29
PV = 739.84
c.
$953.53
d.
$1,308.87
e.
$,1331.78
2.
A bond with 15 years to maturity has a coupon rate of 8.40%.
The bond makes semiannual
payments.
The bond currently sells for 97% of par.
Calculate the YTM.
a.
4.38%
N = 15 x 2 = 30,
PMT = 0.084/2 = 0.042,
PV = 0.97,
FV = 1,
R = 4.38
b.
8.76%
YTM = 2 x 4.38 = 8.76%
c.
9.53%
d.
17.37%
e.
17.53%
3.
Bond X is a 20 year bond with a 10% coupon and 7% YTM.
Bond Y is a 5 year bond with a 10%
coupon and 7% YTM.
Both bonds make semiannual payments.
You believe interest rates will rise
in the short term.
Would you rather hold Bond X or Bond Y?
Why?
a.
Hold Bond X since it has a higher price than Bond Y
b.
Hold Bond Y since it has a lower price than
Bond X
c.
Hold Bond X since it has less interest rate risk than Bond Y
d.
Hold Bond Y since it has less interest rate risk than Bond X
e.
Hold Bond X since it has more interest rate risk than Bond Y
4.
You expect an inflation rate of 8% over the next year.
You would like to earn a real return of 10% on
an asset.
What must be the nominal return for you to hold the asset?
a.
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This note was uploaded on 10/08/2009 for the course BCOR 2200 taught by Professor Tomnelson during the Spring '08 term at Colorado.
 Spring '08
 TOMNELSON

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