ADMS4504-Midterm-Sample2

ADMS4504-Midterm-Sample2 - Name ID AP/ADMS4504 Fixed Income...

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N a m e ID # AP/ADMS4504 Fixed Income Securities and Risk Management Midterm Exam Winter 2010 February 28, 2010 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 # both 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 in your final answers unless otherwise stated. 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, and bonds pay semiannual coupons . 7) You may use the back of the exam paper as your scrap paper. 1
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Numerical questions (4 points each) 1. A bond priced at par ($1,000) has a duration of 6 and a convexity of 40. What happens to the bond’s price if interest rates rise by 30 basis points? The bond price goes to: A) $980.00 B) $982.00 C) $982.36 D) $1,018.00 E) $1,018.36 2. A floating rate security has a market price of 98.6498 per $100 of par value, a spread for life of 250.64 basis points, and a maturity of 12 years. What is the coupon rate on this floater if the reference T-bill rate is 2.5%? A) 4.68% B) 4.74% C) 4.80% D) 4.86% E) 4.92% 3. Bonds A and B are both callable and putable. Bond A : market price of $895, face value of $1,000, 8% coupon rate payable semiannually, 15 years to maturity, may be first called in 5 years at $1,080, may be first called at par in 6 years, and finally may be first put in 8 years at par. Bond B : market price of $454.65, face value of $500, 8% coupon rate payable semiannually, 10 years to maturity, may be first called in 4 years at $508, may be first called at par in 7 years, and lastly may be first put in 9 years at par. Calculate (the yield to worst on Bond A – the yield to worst on Bond B) in basis points. A) - 22 B) - 11 C) - 7 D) - 25 E) - 16 4. The yield on a discount basis on a Treasury bill is 6.9964%. The settlement date is June 16 and the maturity date of the Treasury bill is September 5. Calculate the price of the T-bill per $1 of face value ( please keep at least six decimal places in your answer ). A) 0.984064 2
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B) 0.984258 C) 0.984647 D) 0.984862 E) 0.985060 5. You obtain the following Treasury data for bonds currently trading at their par value ($100) with semiannual coupons: Remaining maturity Coupon rate 2 years 5.2% 2.5 years 6.4% On a bond-equivalent basis, the 6-month, 1-year, and 1.5-year Treasury spot rates are 3.03%, 4.04%, and 5.05%, respectively. What are the corresponding
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ADMS4504-Midterm-Sample2 - Name ID AP/ADMS4504 Fixed Income...

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