ADMS4504-Final-Sample1 - Name ID # AP/ADMS4504A Fixed...

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N a m e ID # AP/ADMS4504A Fixed Income Securities and Risk Management Final Exam Fall 2009 December 21, 2009 Type A Exam This exam consists of 50 multiple choice questions and carries a total of 100 points . Choose the response which best answers each question. Fill in your answers on the bubble sheet . Only the bubble sheet is used to determine your exam score . Please do not forget to write your name and ID # at the top of this cover page and on the bubble sheet. Also please write the type of your exam ( A or B ) on the bubble sheet. Happy Holidays and all the best! Please note the following six points : 1) Read the questions carefully and use your time efficiently . 2) Choose the answers that are closest to yours, because of possible rounding. 3) Keep at least 4 decimal places in your calculations and at least 2 decimal places in your final answers, unless otherwise stated. 4) Each question is worth 2 points. 5) Interest rates are annual unless otherwise stated. 6) You may use the back of the exam paper as your scrap paper. 32 Numerical Questions (2 points each) 1. Use the following daily yield observations to compute a daily standard deviation of yields. The daily yield changes are assumed to be continuously compounded. Day Yield (%) 0 6.4866 1 6.3980 2 6.5682 3 6.4796 4 6.6728 5 6.6829 6 6.7012 A) 1.7124% B) 1.8758% C) 1.9462% 1
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D) 2.1203% E) 2.3985% 2. Assume normally distributed yield changes. The current level of yield is 4%. With a probability of 95%, the range for the future yields has been determined to be [1.8%; 6.2%]. It follows that the annual standard deviation of yields is __________ and the corresponding daily variance of yields is __________ percentages squared, assuming there are 365 calendar days in a year. A) 27.5%; 2.07 B) 27.5%; 0.207 C) 27.5%; 0.000207 D) 55%; 0.000829 E) 55%; 8.29 3. Use the following daily yield observations to construct a 5-day moving average equal weight volatility forecast for Day 5, assuming that the expected value of the daily change in yield is zero. The daily yield changes are assumed to be continuously compounded. Here, volatility refers to standard deviation . Day Yield (%) 0 4.380 1 4.393 2 4.430 3 4.428 4 4.522 5 4.648 A) 1.5209% B) 1.6120% C) 1.7860% D) 1.8870% E) 1.9799% Please use the following information to answer Questions 4 – 6 . Interest rate (in %) Interest rate (in %) r 0 3.5000 r 2,LL 3.7492 r 1,H 5.9196 r 3,HHH 12.0003 2
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r 1,L 3.9680 r 3,HHL 8.0441 r 2,HH 8.3440 r 3,HLL 5.3921 r 2,HL 5.5931 r 3,LLL 3.6144 Consider a floating-rate note (or floater) with a floor of 4%. This floater has a maturity of 4 years and a par value of $100. The coupon rate (paid annually) on this floater is the 1-year forward rate flat (i.e., no margin over the reference rate, which is the 1-year forward rate). Remember that for floaters the coupon interest is paid in arrears, i.e., the coupon rate is set at the beginning of the year but paid at the end of the year. Please keep at least 4 decimal places in both your
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ADMS4504-Final-Sample1 - Name ID # AP/ADMS4504A Fixed...

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