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N
a
m
e
ID #
AP/ADMS4504A
Fixed Income Securities and Risk Management
Midterm Exam
Fall 2009
October 24, 2009
Type
A
Exam
This exam consists of
30 multiple choice questions
and carries a total of
100
points
. Choose the response which best answers each question.
Circle your
answer below
and 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.
Please note the following 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.
4) The 20 “Numerical questions” are worth 4 points each.
5) The 10 “Conceptual questions” are worth 2 points each.
6)
Unless otherwise stated, interest rates are annual, bonds pay
semiannual coupons, and have a face value (or par value) of
$1,000
.
7) You may use the back of the exam paper as your scrap paper.
Numerical questions (4 points each)
1. Consider a Treasury coupon bond with $100 par, 6% coupon
payable
semiannually, 3 years of maturity, yielding at 4.915075% on a bondequivalent
basis. Which of the following is the price quote of this bond?
Please keep at least
4 decimal places in both your calculations and your final answers for this
question
.
A) 102 12
1/4
B) 102 19
1/8
C) 102 28
3/8
D) 102 31
¾
E) 103 02
15/16
1
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View Full Document 2. A Treasury inflation protection security (TIPS) has an original principal of
$50,000. Today’s semiannual nominal interest rate and semiannual real interest
rate are 4% and 2%, respectively. We expect the semiannual nominal rate and
semiannual real rate to rise to 5% and 2.5% in six months from now,
respectively. What will be the principal of this TIPS at the end of one year from
today?
A) $50,000
B) $52,224
C) $52,275
D) $54,600
E) $55,020
3. A firm has two $1,000 par value bonds both selling for $701.22. The first bond
has a coupon rate of 8% and 20 years of maturity. The second bond has the
same yield as the first bond but only 5 years of maturity. Both bonds pay
coupons annually. What is the annual coupon payment on the second bond?
A) $18.56
B) $28.65
C) $35.18
D) $37.12
E)
$38.24
4. Compute the price of the following Treasury bond: $600 par, 5% coupon
payable semiannually, and a maturity of 3.5 years. The Tbill rates at 6 months
and 1 year are 3.2% and 3.6%, respectively. The Treasury spot rates at 1.5
years, 2 years, 2.5 years, 3 years, and 3.5 years are 3.7%, 4%, 3.8%, 4.2%, and
4.5%, respectively. All the interest rates are reported on a bondequivalent basis.
A) $585.87
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This note was uploaded on 12/17/2010 for the course ATKINSON adms 4504 taught by Professor Nabil during the Fall '10 term at York University.
 Fall '10
 Nabil

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