quiz2_sol

quiz2_sol - NAME(PRINT IN FULL ON LINES BELOW(First...

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NAME (PRINT IN FULL ON LINES BELOW) (First Name) (Last Name) FIN 300 Professor Wang Midterm Quiz 2 Spring, 2010 T HERE ARE 10 P AGES IN THIS EXAM . P LEASE CHECK TO MAKE SURE THAT YOU HAVE ALL PAGES . You have 45 minutes to complete this examination. All answers must be recorded on the examination. Many questions ask that some value or values be calculated. For question 2-4, you must show on the exam itself the reasoning you used to obtain your answers and any intermediate steps involved in the calculations to obtain full credit. Print your name at the top of the first page.

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2 1. (10 points) The following are multiple-choice questions. There is a unique answer to each question. Check the box next to your answer. a) A basis point is ± the credit spread of a corporate bond. ± 10% of face value. ± 1/100 of 1%. ± exactly one percentage point. ± none of above. Answer: C b) Face value is ± always higher than the price of a bond. ± always lower than the price of a bond. ± always the same as the price of a bond. ± the coupon payment. ± None of the above. Answer: E c) Consider a bond which pays 7% semiannually and has 8 years to maturity. The market requires an APR of 8% on bonds of this risk. What is this bond's price per \$1000 face value? ± \$942.50 ± \$911.52 ± \$941.74 ± \$1,064.81 ± None of the above. Answer: C PV = 35/4%*(1-(1/(1.04) 16 ) + 1000/(1.04) 16 = \$941.74
3 d) A US Treasury bond is listed in The Wall Street Journal as a 12 3/4s of December 2009. This bond pays ± \$127.50 in June and December. ± \$63.75 in June and December.

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quiz2_sol - NAME(PRINT IN FULL ON LINES BELOW(First...

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