Quiz_2_Review[1]

Quiz_2_Review[1] - Review for Quiz 2 Bring the following:...

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Review for Quiz 2 Bring the following: Calculator Pencil Green Scantron 1 Cheat Sheet – 1 Sided. That means only 1 side paper. You can write whatever you want. I suggest writing down the formulas on the notes, questions, and answers posted on ilearn. You will be given 1 hour and 20 minutes to complete the quiz. We will start sharply at 7:00 pm Grades will be on ilearn the very next day. I recommend to write the answers on the actual quiz first, then bubble in the answers. You can keep the quiz. Use the quiz to compare your answers to the answer key that will be posted online. The quiz will be based on Chapters 9, 10, 11, 21, and 13.
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Chapter 9 1. Purpose of Money Markets? 2. Tbills Calculate the discount yield, investment yield, and the Tbill price from an auction. Ex. 1 What is the discount and investment yield on a 91 day Tbill that has a face value of $1,000 and a price of $960? Discount = (1,000-960)/1,000 * (360/91) = 15.82% Investment Yield = (1,000-960)/960 * (365/91) = 16.71% Ex. 2 The Treasury auctions off 1.5 billion dollars worth of Tbills. Non-competitive bidders want to buy 500 million dollars worth of Tbills. What is the prevailing price? Bidder Bid Amount Price 1 $500 million $0.9940 2 $750 million $0.9901 3 $1.5 billion $0.9925 4 $1 billion $0.9936 5 $600 million $0.9939 In this case there is 500 million guaranteed so we will start with 1.5-.5=1 billion. Bidder 1 bids the highest price, so there is 500 million leftover. Bidder 5 has the next highest price and there is nothing left over. So the price is .9939 and Bidder 1 and 5 are the only bidders to buy at .9939. 3. What is the fed funds rate? 4. What are negotiable certificates of deposits? 5. What is commercial paper? 6. What are Eurodollars?
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Chapter 10 1. What is the difference between Tbills, Tnotes, and Tbonds? 2. Be able to define all the following bond risks: a. Default risk b. Interest rate risk c. Call risk d. Purchasing power risk e. Re-investment risk Interest Rate Risk : Lower the coupon the greater the interest rate risk. Lower the yield the greater interest rate risk.
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This note was uploaded on 09/20/2011 for the course FIN 353 taught by Professor Cobus during the Spring '08 term at S.F. State.

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Quiz_2_Review[1] - Review for Quiz 2 Bring the following:...

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