Fabozzi, 8ed, question 4.4
(a) At a yield to maturity of 8%, the price of bond A is par, $100 per $100 face value. Should
the yield rise by 100 basis points to 9%, the price of the bond is:
4
$100
8%
1 (1.045)
$100
(1.045) 4 $98.2062
2
0.045
The p
1
BONDS WITH EMBEDDED OPTIONS
Suggested questions from Fabozzi, 8th edition, chapter 17: #7, 14, 18
INVESTMENT CHARACTERISTICS OF CALLABLE BONDS
A callable bond is a bond where the issuer has the right to retire the debt, fully or
partially, before the sc
1
LIABILITY MANAGEMENT
Suggested questions from Fabozzi, 8th edition, chapter 24: #11, 12, 13, 14, 25 NOTE:
There is an ERROR in the textbook solution to question 24.25. See the posted Excel file
Fabozzi8edQ24.25POST for the correct solution.
At any time,
Question 1:
Compute the appropriate discount factors, spot rates, and one-period (i.e. 6-month)
forward rates for all periods on the given curve and display them in the coloured
cells.
Express all computed interest rates as APRs, compounded semi-annually.
Evolution of tree with rates as APR semi shown below. Blue tabs
use this data. In the tree I am modeling the evolution of the
effective semiannual rate.
Yrs To Mat
0.5
1.0
1.5
2.0
Volatility
0
Spot as APR Semi DF
Price zero
3.575% 0.982438905 98.24389046
PART A, Multiple choice questions: Circle the appropriate choice for each question.
(2 points for each for a total of 18 points)
1) A bond pays coupons semi-annually; the yield to maturity of the bond is 6.5%. The YTM is quoted as a
monthly-APR. What is t
Name:
ID #:
Alberta School of Business
FIN 418
Practice Final Exam
Students are allowed both sides of two 8.5 by 11 pages of notes
Instructor: Gonzalo Morales
Available time: 120 Minutes
Fall 2016
Available points: 100
Question
Points
Available
Part A: Mu
1
TERM STRUCTURE OF INTEREST RATES
Suggested questions from Fabozzi, 8th edition, chapter 5: #1, 2, 9, 19
SELECTED BOND YIELDS
The National Post (http:/www.financialpost.com/markets/data/bonds-canadian.html) of
June 18, 2013 reported as follows on selecte
1
CONVERTIBLE BONDS
Suggested questions from Fabozzi, 8th edition, chapter 19: #8 (Note that there is an error
in the textbook solution to this question. The market conversion premium per share is
$3.75, not $3.57.)
Many corporate bonds are convertible by
FIN 418 B1 Midterm Exam, Winter 2014
The midterm exam is scheduled for Tuesday, March 4.
Please note the following about the midterm exam:
1. The exam will be on the material discussed in class, material given in the class
notes, and material covered in t
1. Is the following statement TRUE or FALSE? Explain.
The total return of a zero-coupon bond always equals its yield to maturity prevailing at
the time the bond was purchased.
Solution: FALSE
1
Future$ h
Total return =
1 , where Future$ = (Coupon inter
FINANCE 418 - FIXED INCOME
Pricing of Bonds
1
Pricing of bonds
SuggestedquestionfromFabozzi,8thedition,
chapter2:#11
2
Time value of money
Thetimevalueofmoneyreferstothefactthatmoney
inhandtodayisworthmorethantheexpectationofthe
sameamounttobereceivedinth
1
MEASURING YIELD
Suggested questions from Fabozzi, 8th edition, chapter 3: #1, 2, 13
CONVERSION FORMULAS
Two rates of interest compounded at different frequencies are said to be equivalent if for
any amount of money invested for any length of time, the t
1
PRICING OF BONDS
Suggested question from Fabozzi, 8th edition, chapter 2: #11
TIME VALUE OF MONEY
The time value of money refers to the fact that money in hand today is worth more than
the expectation of the same amount to be received in the future. The
1
BOND PRICE VOLATILITY
Suggested questions from Fabozzi, 8th edition, chapter 4: #1, 3, 6, 7, 11, 13
The interest rate risk of a bond may be measured by how much its price changes as
interest rates change. Given an initial and a shifted spot rate curve,
1
BOND MARKETS
Suggested questions from Fabozzi, 8th edition, chapter 7: #11
Useful websites:
www.bankofcanada.ca
www.investinginbonds.com
www.bloomberg.com Click on Markets/Bonds.
www.federalreserve.gov The home page of the Federal Reserve Bank of New Yo
Grader Use Only
Available
2
1
1
4
Question
1A I
1aA II
1B
Total
Score
0
A. General formula:
i.
ii.
When the first payment P is to come in exactly 1 full period, we know that a perpetuity's price, as a function o
the appropriate periodic interest rate to u