Practice Question Chapter 1.2

Practice Question Chapter 1.2 - Chapter 1 Practice 1 Given...

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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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This note was uploaded on 11/06/2010 for the course ECON Econ taught by Professor Liasa during the Spring '10 term at University of San Francisco.

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Practice Question Chapter 1.2 - Chapter 1 Practice 1 Given...

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