A) The market event is between a bearish and bullish market. There has been a steady
recovery in the market to a bullish market. My investment horizon is to incur a capital
gain in the next 5-8 years. Going long is just trading verbiage for buying
Practice Problem 4:
The underlying bond to an interest rate futures contract trades at 99 and it pays a
10.00% coupon rate.
The current 6-month rate is 9.60%.
A) Calculate the cost of carry (in %). R-c = 9.6%-10%
B) At what fair price should a 6-month fut
Fixed Income security being exchanged between buyer and seller, what price and when.
Futures contracts upto a year. Expeiration delivery at end would be at price initially
If interest rates go up, prices go down and vice versa.
Seller of Contract S
Pricing of Bonds:
PV, FV, PAYMENT, PV OF MULTIPLE FLOWS. ASSUME SEMI-ANNUAL UNLESS
FINAL ANSWER FOR EG INT. RATE SHOULD BE ANNUALIZED. DURATION IS
CALC. ON SEMI ANNUAL BASIS. MAKE SURE TO CONVERT IT TO ANNUAL
TYPO IN PRICING OF BONDS. Practice
PROBLEM SET NUMBER 1
Due: February 6, 2017
1. What do you call the specified date on which the principal amount of a bond is repaid?
Know the parts of a bond
2. What is the cash flow of a 5 year bond that pa
CUSTOM PAPER WRITING SERVICE
> ORDER NOW <
Tombstones Case Essay
Case Study 1: Tombstones (HBS 5-213-085)
(a) Why is MSFT raising money?
They are raising money through 4 series of unsecured notes because the
Warrants and Convertibles
What is a warrant?
Right to purchase stock from the firm on or before expiration date at strike
Example: KKR leveraged buyout of Safeway stores.
Old common stock converted into:
Junior subordinated debenture
Problem Set 3, Due March 1rd
FI 312, Spring 2016
Prof. Sophia Zhengzi Li
1. What is the key underlying assumption of the single index model?
2. The betas and variances of three assets are 1 = 0.5, 2 = 1, 3 = 1.5, and 12 =
= 10%. Compute
20%, 22 = 10%, 3
1. What are on-the-run and off-the-run issues?
On-the-run issues are recently issued Treasury securities; they are the most liquid securities with
a very narrow bid-ask spread. Off-the-run issues are Treasury securities issued earlier; they are
Price at Yield
Yield based on IRR
Rate of Return
At the end
At the beg
PV of cashflow (a.c.)
PV of cashflow (c.c. V discounted