Midterm Exam

Midterm Exam - Midterm Exam 1. (5 points) A portfolio...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Midterm Exam 1. (5 points) A portfolio consists of two options on the same underlying stock, with the same expiration date in three months. The stock currently trades at $85. One option is a call with strike price of $87. The other option is a put with strike price of $84. Show the payoff graph for the portfolio. 2. (5 points) A bond pays $3000 in six months and then $3000 in twelve months. The current market value is $5740.41. At semi-annual compounding, what is the annual interest rate? (You can solve the quadratic or iterate; assume the interest rate is a whole number less than 10%.) 3. (10 points) A bond with face value of $1,000,000 pays the $1,000,000 of principal in six months. The current market value is $964,399. What is the six-month zero rate (continuously compounded)? What is the bond yield (continuously compounded)? 4. (10 points) A bond with face $10,000,000 pays that principal in one year and has current market value of $9,441,219. What is the one-year zero rate? Based on this answer and
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/04/2012 for the course FIN 420 taught by Professor Poniachek during the Spring '12 term at Rutgers.

Ask a homework question - tutors are online