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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
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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