Chapter 1
Practice 1
Given the information in the 1
st
and 3
rd
columns for the US investor, complete the
information in the 2
nd
and 4
th
columns:
Quoted Price
Price per $1 of par
value
Par Value
Dollar Price
103 1/4
$1,000
70 1/8
$5,000
87 5/16
$10,000
117 3/32
$100,000
Practice 2
A floating rate issue has the following coupon formula:
6 month Treasury rate + 50 basis points with a cap of 7%
The coupon rate is set every six months. Suppose that at the reset date the 6 month
Treasury rate is as shown below. Compute the coupon rate for the next 6 month period.
6 month Treasury Rate
Coupon Rate
First reset
5.5%
Second
reset
5.8%
Third reset
6.3%
Fourth reset
6.8%
Fifth reset
7.3%
Sixth reset
6.1%
Practice 3
Identify the following types of bonds based on their coupon structures:
a)
coupon formula: coupon rate = 32% - 2 x (5 year treasury)
b)
Coupon structure:
Years 1 – 3
5.1%
Years 4 – 9
5.7%
Years 10 – 20
6.2%
c)
Coupon formula: coupon rate = change in the consumer price index + 3.1%
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Chapter 2
Practice 1

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- Spring '10
- Liasa
- Finance, Portfolio Manager, Basis Points
-
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