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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 multiplechoice 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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View Full Document 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 Tbill 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 Tbill 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 bondequivalent basis, the 6month, 1year, and 1.5year Treasury spot
rates are 3.03%, 4.04%, and 5.05%, respectively. What are the corresponding
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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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