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MA 373 F10 Test 3

MA 373 F10 Test 3 - Math 373 Test 3 November 9 2010 1 A...

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Math 373 Test 3 November 9, 2010 1. A callable bond matures in 10 years for 10,000. The bond has semi-annual coupons of 400. The bond is callable based on the following schedule: Call Date Call Premium 6 Years 700 7 Years 500 8 Years 300 9 Years 150 Calculate the price of this bond to yield 6% convertible semi-annually.

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2. Tu Telecommunications LTD pays a quarterly dividend with the next dividend in 3 months. The next dividend will be 100. Thereafter, each dividend will be 98% of the prior quarterly dividend. The price of this stock is 2127.66. Calculate the expected yield convertible quarterly.
3. The following three bonds are available: Bond A is a one year bond which matures for 1000 and pays annual coupons of 100. This bonds sells for 1067.96 Bond B is a two year bond which matures for 5000 and pays annual coupons of 250. This bond can be purchased for a price of 5120.06. Bond C is a three year zero coupon bond which matures for 1000 and sells for 863.84. Determine [2,3] f . (Hint: Find the spot rates and then find answer.)

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4. An annuity has the following payments: a.
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MA 373 F10 Test 3 - Math 373 Test 3 November 9 2010 1 A...

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