MA373 S10 Test 3-1

MA373 S10 Test 3-1 - Test 3 Math 373 Spring 2010 1 Tian...

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Test 3 Math 373 Spring 2010 1. Tian purchased a 10 year callable bond with a par value of 10,000. The bond matures for par and pays semi-annual coupons at a rate of 8% per year. The bond is also callable at the end of years 6 through 9. The bond is callable at the following values based on the year of call: End of Year Value 6 10,600 7 10,500 8 10,400 9 10,200 Tian buys the bond to yield 6% convertible semi-annually. Calculate the price that Tian paid for the bond.
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2. A one year bond matures for 1000 and has annual coupons of 50. The price of this bond is 1000. A two year bond matures for 1000 and has annual coupons of 50. The price of the bond is 975. A three year bond matures for 1000 and has annual coupons of 50. The price of the bond is 950. Giving all answers as percents to 4 decimal places (e.g. 1.2345%), complete the following table: r 1 r 2 r 3 f [1,3] f [2,3]
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3. Ben owns a two year bond with annual coupons of 50 and a maturity value of 1000. Calculate the Modified Convexity of Ben’s bond at 20% interest.
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4. Scott Corporation sells a preferred stock that pays a quarterly dividend.
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