UNIVERSITY OF BRISTOL
Examination for the Degree of MSc in Finance and Investment
and in Economics and Finance
January 2015
EXAM PAPER NUMBER ECONM2035
ASSET PRICING
(Module No: ECONM2035)
Time allowed: THREE hours
Answer FOUR questions from the following

UNIVERSITY OF BRISTOL
Examination for the Degree of MSc in Finance and Investment
and in Economics and Finance
January 2014
EXAM PAPER NUMBER ECONM2035
ASSET PRICING
(Module No: ECONM2035)
Time allowed: THREE hours
Answer FOUR questions from the following

UNIVERSITY OF BRISTOL
Examination for the Degree of MSc in Finance and Investment
and in Economics and Finance
MAY / JUNE 2013
EXAM PAPER NUMBER ECONM2035
ASSET PRICING
(Module No: ECONM2035)
Time allowed: THREE hours
Answer FOUR questions from the follow

4.
Yield to maturity calculations
A bond with 2 years to maturity, face value $100, an annual
coupon rate of 5% and semi-annual coupon payments
trades on the market at $105.89. Calculate the yield to
maturity on this bond to an accuracy of one tenth of a

3. Bond valuation using the term-structure
The current US term structure of interest rates is as given below:
Maturity
0.5
1.0
1.5
2.0
2.5
3.0
Spot rate
2.75%
2.5%
2%
2.25%
2%
1.75%
Compute the fair price of a bond with 3 years to maturity, an annual coup

1. Properties of the Tangency portfolio
When risk-averse investors have access to a risk-free asset, as well as a
set of risky assets, we have demonstrated that the efficient frontier is a
straight line, linking the risk-free asset with the tangency portf

2. Deriving forward interest rates from the term-structure
Forward Rates from Observed Rates
(1 y n ) (1 y n 1 )
n
a) f1 = (1+y2)2/(1+y1) -1
= (1+4%)2/(1+4.5%) -1 = 3.5%
b) f2 = (1+y3)3/(1+y2)2-1
= (1+4.5%)3/(1+4%)2-1=5.5%
n 1
(1 f n )
c) If the market fo

2. Macauley
Duration and Modified Duration
The Macauley Duration, D, of a bond is simply the negative of the
elasticity derived in question (1). Thus, for a bond with coupon rate c,
face value X and T years to maturity it can be written as:
D=
Where the w

1. X ~ ( 5, 36) and Y = 0.7X + 2. Compute E[Y] and E[Y2 ]. Use
this to compute Var[Y]. How are the variances of X and Y
related?
2.
is a discrete random variable with Show that for all
positive integers
3. X and Y have a multivariate discrete distribution