AssignmentOne

# AssignmentOne - ActSc 445/845 Assignment One Due Date...

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ActSc 445/845 Assignment One Due Date: Tuesday, October 5, 2010. 1. For a T-Bill with a given price P , face value F > P , and maturity of n < 360 days: (a) Show that the rates r D (bank discount yield) and r C (yield quoted in Canada) satisfy the relation r D < r C ; (b) Let r be the T-Bill’s eﬀective annual yield. Is it possible to have r < r C ? Justify your answer. 2. You purchased a Canadian T-Bill with face value 1000 on March 1, 2010. The T-bill is expiring on September 1, 2010 and is quoted at 3.2%. On May 1, 2010, this T-Bill is quoted at a rate r so that it has the same price as a US T-Bill with the same expiration date and face value which is currently quoted at 3.0%. If you sell your T-bill on May 1, 2010, what will be the eﬀective annual return on your investment? 3. This exercise requires that you solve a nonlinear equation (for example, using Excel’s Goal Seek function, or Matlab’s fsolve). Consider a ﬁve- year bond paying semi-annual coupons issued on January 1, 2009, with

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## This note was uploaded on 12/12/2010 for the course ACTSC 445 taught by Professor Christianelemieux during the Fall '09 term at Waterloo.

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AssignmentOne - ActSc 445/845 Assignment One Due Date...

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