Homework 3

Homework 3 - Fin 448: Fixed-Income Securities Homework 3...

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Fin 448: Fixed-Income Securities Homework 3 Wei Yang Assigned: Apr 14 Due: Apr 21 Each problem counts as 10 points. 1 Commercial papers Commercial papers are short-term corporate debts in the form of zero-coupon bonds with maturities from 1 month to 9 months. They are usually issued by high credit quality firms (most of them financial institutions) directly to investors. They are not traded in secondary markets since investors usually hold to maturity. Suppose you want to buy commercial papers paying $1M face value in 3 months, issued by a Libor quality firm. Currently, the 3-mo Libor is fixed at 4%. (1.1) What is the price you need to pay for the commercial papers? (1.2) What is the duration and DV 01 of your holdings? Suppose one month has passed after your purchase. Now the Libor fixings are shown below. Maturity 1 mo 2 mo 3 mo Libor (%) 4.15 4.21 4.27 (1.3) If these commercial papers are traded, how much is the price? (1.4)
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This note was uploaded on 10/06/2011 for the course FIN 448 taught by Professor Weiyang during the Spring '10 term at Rochester.

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Homework 3 - Fin 448: Fixed-Income Securities Homework 3...

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