Fixed Income Chapter 9 homework

Fixed Income Chapter 9 homework - Chapter 9- Valuing bonds...

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Chapter 9- Valuing bonds with Embedded Options 1) Which of the following statements concerning the calculation of value at a node in a binomial interest rate tree is TRUE? The value at each node is the: a. Present value of the two possible values from the next period b. Average of the present values of the two possible values from the next period c. Sum of the present values of the two possible values from the next period d. Average of the future values of the two possible values from the next period 2) An increase in interest rate volatility: a. Increases the value of bonds with embedded call options b. Increases the value of bonds with embedded put options c. Does not affect the value of bonds with embedded options d. Increases the value of low-coupon bonds with embedded options, but decreases the value of high-coupon bonds with embedded options 3) The option-adjusted spread (OAS) on a callable corporate bond is 73 basis points using the on-the-run Treasuries as the benchmark rates in the construction of the
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This note was uploaded on 04/04/2012 for the course ECON 313 taught by Professor India during the Spring '12 term at University of San Francisco.

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Fixed Income Chapter 9 homework - Chapter 9- Valuing bonds...

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