This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: UNIVERSITY OF TORONTO Joseph L. Rotman School of Management Nov. 13, 2007 Bal/Chang/Lenouvel MGT337Y MIDTERM EXAMINATION #1 Pomorski/Rahaman DURATION  2 hours Aid Allowed: Silent electronic calculator and one 1sided 8 1 2 11 crib sheet Name: Student Number: Circle the section that you are registered in: Pomorski (Mon. 11am1pm) Pomorski (Mon. 1pm3pm) Rahaman (Tue. 9am11am) Rahaman (Tue. 11am1pm) Pomorski (Tue. 1pm3pm) Chang (Tue. 6:30pm8:30pm) Bal (Wed. 4pm6pm) Lenouvel (Fri. 10am12pm) Lenouvel (Fri. 12pm2pm) Instructions 1. Answer all questions on the examination paper. 2. Answer five out of six questions. Each question is worth 20 marks. Do not answer all six questions! In the table below, cross out the question that you choose not to answer. Question Marks 1 2 3 4 5 6 Total 1 1. You have two bonds. Bond 1 is a pure discount (zerocoupon) bond that matures in one year, has a face value of $1,000, and a yield to maturity of 2% . Bond 2, maturing in two years with a face value of $1,000, is a coupon bond with annual coupons and 5% coupon rate. Bond 2 currently trades at par. Lastly, the forward rate for the third year is 8%. (This information is relevant for parts ad of this question.) a. What is the yield to maturity of the coupon bond described above (Bond 2)? (4 marks) b. What is the term structure of spot interest rates, r 1 , r 2 , and r 3 ? (4 marks) c. What is the forward rate for the second year (at this rate, you can borrow money in a year and repay in two years)? (4 marks) d. Compute the price of a 3year coupon bond with face value of $1,000, annual coupons, and 10% coupon rate. (4 marks) e. Suppose that the oneyear spot interest rate, r 1 , is 5%. There is a pure discount (zerocoupon) bond with one year to maturity and the face value of $1,000. The price(zerocoupon) bond with one year to maturity and the face value of $1,000....
View
Full
Document
This note was uploaded on 01/10/2011 for the course RSM RSM332 taught by Professor Booth during the Spring '10 term at University of Toronto Toronto.
 Spring '10
 BOOTH

Click to edit the document details