BCOR 2200 Spring 2009 Mid 2 Ver 1 with Answers

BCOR 2200 Spring 2009 Mid 2 Ver 1 with Answers - BCOR 2200...

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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: _____________________________________________ Instructions: 1. Check your exam to make certain you have 27 questions--all 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 computer-graded 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 semi-annual 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 semi-annual 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 semi-annual 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.

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BCOR 2200 Spring 2009 Mid 2 Ver 1 with Answers - BCOR 2200...

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