AK/ADMS4504A
Assignment #2 Solutions
Fall 2008
Question 1 (20 marks)
Use the daily yields in the following table (see next page) to compute a daily
standard deviation of yields. Next annualize the daily standard deviation just
calculated first using 365 c
AP/ADMS4504
Assignment #1 Solutions
Winter 2011
Question 1 (21 marks)
This question has three independent parts, (a), (b), and (c).
(a) You are given the following information: a 0.5-year zero-coupon bond, face
value of $10,000, currently priced at $9,750
AP/ADMS4504
Assignment #2 Solutions
Winter 2011
Question 1 (Interest rate forecasting) (26 marks)
Assume that we are in December 2009 and try to make forecasts of the five year
interest rate at the end of January 2010. For this question, you just need to
Name
ID #
AK/ADMS4504A
Fixed Income Securities and Risk Management
Final Exam
Fall 2007
December 13, 2007
Type A Exam
This exam consists of 50 multiple choice questions and carries a total of 100
points. Choose the response which best answers each questio
AP/ADMS4504 Assignment #1 Winter 2011 Instructions: (1) This assignment is to be done individually. You must sign and submit the standard cover page supplied as the last page of this assignment. This assignment is due at the start of class in the week sta
AK/ADMS4504A
Assignment #2
Fall 2008
Instructions:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
This assignment is to be done individually. You must sign and submit
the standard cover page supplied as the last page of this
assignment.
Before you start, please read the not
Chapter 2 Risks Associated with Investing in Bonds
1
Plan of the lecture
Risks associated with investing in bonds Interest rate risk Yield curve risk Call and prepayment risk Credit risk Sovereign risk
2
Risks associated with investing in bonds
Many ris
Chapter 1 Features of Debt Securities
1
Plan of the lecture
Basic features of a bond Bond covenants Coupon rate structures Floating rate securities Accrued interest Options embedded in a bond Borrow funds to purchase bonds
2
Basic features of a bond
In
ADMS4504 Winter 2009
Final exam solutions
AK/ADMS4504
Fixed Income Securities and Risk Management
Final Exam Solutions
Winter 2009
32 Numerical Questions (2 points each)
1. (Q. 6 in B) Consider a 7-year plain vanilla interest rate swap in which two
counte
School of Administrative Studies Faculty of Liberal Arts and Professional Studies
Fixed Income Securities and Risk Management
Course Number: AP/ADMS4504 Term: Winter 2011 Course Outline
Instructor: Professor Xiaofei Li
Class Hours and Rooms: Section M, We
AP/ADMS4504 Midterm Exam Name Section ID #
Fall 2010
AP/ADMS 4504 Fixed Income Securities and Risk Management
Midterm Exam - Solutions Fall 2010
This exam consists of 30 multiple choice questions and carries a total of 100 points. Choose the response whic
Chapter 3 Overview of Bond Sectors and Instruments
1
Overview of the sectors of the bond market
Bond market sectors Internal (national) bond market
Domestic bond market
Sovereign bonds Agency bonds Municipal bonds Corporate debts Asset-backed securities
2
Test Bank Key
1.
(p. 361)
The types of skills that are required to prepare an effective strategic case analysis can benefit you in
actual business situations.
TRUE
Dess - Appendix Analyzing. #1
2.
(p. 361)
There are two capabilities that can be learned th
Chapter 4
Understanding Yield Spreads
(Supplementary slides)
1
Interest rate policy tools
1) Open market operations
Examples: On March 18th, 2009 the Fed
announced that in order to stimulate the U.S.
economy they would purchase:
a) US$750 billion of mortg
Chapter 1
Features of Debt
Securities
1
Plan of the lecture
Some basic features of a bond
Coupon rate structures
Floating rate securities
Accrued interest
Options embedded in a bond
Borrow funds to purchase bonds (repo)
2
Basic features of a bond
Bonds ca
Chapter 2
Risks Associated
with Investing in
Bonds
(Supplementary slides)
1
Yield curve risk
Yield curve shows the relationship
between bond yields and bond maturities
Yield curve can be of any shape
10
9
)
8
7
6
4
3
2
Yl t M ryY ) %
i d a i (T (
e o t t
Chapter 2
Risks Associated
with Investing in
Bonds
1
Plan of the lecture
Volatility risk
Interest rate risk
Credit risk
2
Volatility risk
Price of callable bond = price of option free bond
price of embedded call option
Price of putable bond = price of op
AP/ADMS 4504 Section A
Assignment #1 Solutions
Fall 2014
Question 1 (25 marks)
This question has four related parts, (a), (b), (c), and (d).
A five year step-up note pays coupons semiannually and has the following
coupon rate structure: the annual coupon
Chapter 3
Overview of Bond Sectors
and Instruments
(Supplementary slides)
1
External bond market
Eurobonds
Issued (or underwritten) by an international
syndicate of bankers
This is the most important characteristic of a
Eurobond offering
Offered simultane
Chapter 1
Features of Debt
Securities
(Supplementary slides)
1
Basic features of a bond
In investment management, the most
important decision is the allocation of funds
across asset classes
Two major asset classes are equities (or
stocks) and fixed income
AP/ADMS 4504 Sections N and M
Assignment #1 Solutions
Winter 2014
Question 1 (16 marks)
This question has two related parts, (a) and (b).
Consider the following three Treasury strips: strip 1: 0.5-year, face value of
$1,000, fairly priced at $970.29; stri
Solution to in-class exercise 1
a) Bythe definition of duration, bond price
decreases approximately by 6%,
i.e., -6 (7.5% 6.5%) 6 % 6%
1
b) Bond price increases roughly by 3.75%,
i.e., -7.5 (9.9% -10.4%) 7.5 ( 0.5%) 3.75%
1
Solution to in-class exercise 1
Chapter 5
Introduction to the
Valuation of Debt
Securities
(Supplementary slides)
1
Valuation models
The binomial model is used to price
bonds with embedded options (e.g., call
and put options etc.)
See the next slide for an example
2
Valuation models
$1
Chapter 6
Yield Measures, Spot
Rates, and Forward Rates
(Supplementary slides)
1
Yield measures
Current yield
Current yield is calculated by dividing the
annual coupon payments by the bonds price
Coupon payments
Bond price
Example: Coupon payments = $60
An ERisk.com Case Study
Orange County
O
n December 6 1994,
Orange County, a prosperous district in California, declared bankruptcy after suffering losses of
around $1.6 billion from a wrongway bet on interest rates in one of
its principal investment pools
Week 8
Valuing Bonds
with Embedded
Options
1
Plan of the lecture
A binomial model
Valuing an option free bond by a binomial
tree
Constructing the binomial tree
Callable bond valuation
Option adjusted spread (OAS) and relative
value analysis
Putable b
Week 9
Mortgages I
1
Introduction
The mortgage sector of the bond market
includes:
1) Residential mortgage backed securities
Agency mortgage backed securities are issued
by one federally related institution, Ginnie Mae, and
two government sponsored enterp
School of Administrative Studies
Faculty of Liberal Arts and Professional Studies
Fixed Income Securities and Risk Management
Course Number: AP/ADMS 4504 M & N
Term: Winter 2017
Course Outline
Instructor: Saikat Sarkar, email: [email protected]
Section
Sec
Week 9
Mortgages I
(Supplementary slides)
1
Fixed rate mortgage
Consider a $100,000, 30 year (or 360 month),
mortgage loan with a fixed mortgage rate of
8.125% (annual, so the monthly mortgage rate is
8.125% / 12 = 0.677083%). The monthly mortgage
payment
Week 12
Modelling the Term
Structure of Interest
Rates, and Interest Rate
Derivatives
(Supplementary
1
Traditional theories of the
term structure of interest
rates
The forward rate can be interpreted as:
1) a break even rate
2) a rate that allows the inv