Quiz 8
FIN4014 Fixed Income
Suppose the current annual spot rates are as follows:
6 months
2%
12 months
2%
18 months
4%
Assume semi-annual compounding.
Calculate the prices of (1) 6-month zero coupon bond and (2) 18-month coupon bond with the
annual coupo

Quiz 8
FIN4014 Fixed Income
10/23/2015
1. You have collected following information about the firm XYZ:
The firm issues a corporate bond: par value = $500, annual coupon = $100 (paid once a
year), maturity = 2 years.
The current total value of the firm (in

Quiz 9
FIN4014 Fixed Income
1. You are the treasurer of a company and are obliged to arrange for a debt payment of $1 million 2
years from now.
Assume annual compounding and annual coupon payment.
The term structure of interest rates is flat at r = 6%. In

HW 4
solution
Efficient Market Hypothesis
(a) What is the efficient market hypothesis?
Efficient Market Hypothesis: Prices of assets (e.g., stocks and bonds) at time t incorporate all
available information at time t
(b) Does the efficient market hypothesi

HW 3
1. What are the main differences between corporate bonds and US Treasury bonds? (3 points)
Answer: Corporate bonds have default risk because issuers have limited liability; have
contractual provisions; and are not as liquid as Treasure bonds.
2. What