coursefm_0505

coursefm_0505 - Exam FM - May 2005 1. Which of the...

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Course FM 4 May 2005 1. Which of the following expressions does NOT represent a definition for n a ? (A) () 11 n n i v i  +−   (B) 1 n v i (C) 2 n vv v +++ (D) 1 1 n v v v (E) 1 1 n n s i +
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May 2005 5 Course FM 2. Lori borrows 10,000 for 10 years at an annual effective interest rate of 9%. At the end of each year, she pays the interest on the loan and deposits the level amount necessary to repay the principal to a sinking fund earning an annual effective interest rate of 8%. The total payments made by Lori over the 10-year period is X . Calculate X . (A) 15,803 (B) 15,853 (C) 15,903 (D) 15,953 (E) 16,003
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Course FM 6 May 2005 3. A bond will pay a coupon of 100 at the end of each of the next three years and will pay the face value of 1000 at the end of the three-year period. The bond’s duration (Macaulay duration) when valued using an annual effective interest rate of 20% is X . Calculate X . (A) 2.61 (B) 2.70 (C) 2.77 (D) 2.89 (E) 3.00
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May 2005 7 Course FM 4. An estate provides a perpetuity with payments of X at the end of each year. Seth, Susan, and Lori share the perpetuity such that Seth receives the payments of X for the first n years and Susan receives the payments of X for the next m years, after which Lori receives all the remaining payments of X . Which of the following represents the difference between the present value of Seth’s and Susan’s payments using a constant rate of interest? (A) n nm X av a   (B) n X a ±± (C) 1 n X a + (D) 1 n X a (E) 1 n X va v a +
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Course FM 8 May 2005 5. Susan can buy a zero coupon bond that will pay 1000 at the end of 12 years and is currently selling for 624.60 . Instead she purchases a 6% bond with coupons payable semi-annually that will pay 1000 at the end of 10 years. If she pays X she will earn the same annual effective interest rate as the zero coupon bond. Calculate X . (A) 1164 (B) 1167 (C) 1170 (D) 1173 (E) 1176
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May 2005 9 Course FM 6. John purchased three bonds to form a portfolio as follows: Bond A has semi-annual coupons at 4%, a duration of 21.46 years, and was purchased for 980. Bond B is a 15-year bond with a duration of 12.35 years and was purchased for 1015.
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This note was uploaded on 10/27/2010 for the course PSTAT 172a taught by Professor Staff during the Winter '08 term at UCSB.

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coursefm_0505 - Exam FM - May 2005 1. Which of the...

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