Name (please print)
San Jose State lJniversity
Instructions and notes:
Please put your name on BOTH the scantron and this exam and return both.
missing from either, you will receive ZERO on the exam
no exception and no changes aftervvards.
Please put yo ur test VERSION on the scantron.
the version is missing, your exam will be assigned
a version at random and corrected; the result will not be changed.
This is a closed-book, closed-notes exam, Do not consult others. You mav use onll' a calculator.
There is one correct answer to each problem. Multiple answers receive zero point,
Unless specified otherwise, approximations should be rounded to 2 places after the decimal. Unless
specified otherwise, a debt securitv has a face (par) r'alue of
Unless specified otherwise, assume that
investors maximize their net rvorth (i.e., they are
and firms maximize their
common shareholders' net worth.
markets are efficient.
firms are t1'pical of the industrf in n,hich thel' operate.
both firms and individuals are residents of the United States. and are interested in
profits, u,ealth and consumption in terms
the US S. g
Earnings on municipal bonds are exempt from income-lax; earnings on all other bonds
Return includes both interest/dividend und capital gain (or loss)
price; i6:initial interest rate;
of periods; 1o.r: N-period spot rate;
one-period spot rate;
one-period forward (expected) rate effective one year from now;
and so on; ,f;_r.N
one-period forward rate effective between period N-1 and period N.
liquidity premium for an N-period bond.
The Expectations Theory is when
A bond with a par value of
1,000 with an annual coupon has one year to maturity. Its3lrn-ent
yield is 1.0o/o and its YTM
What is the current market price of this bond?