DEBT SECURITIES
Semester 1 2009: Quiz 4 Solutions Version B
1. On the following diagram, sketch an overall decrease in interest
rates with a positive butterfly shift.
Yield
Initial curve
Maturity
2. What have historically been the most significant and the
FACULTY OF LAW AND MANAGEMENT
SCHOOL OF ECONOMICS AND FINANCE
FIN5DBS DEBT SECURITIES
ASSIGNMENT
Due Date: 12:00 noon, Monday 11th May 2009
Topic:
Based on the publicly available information concerning Orica Ltd, its industry
sector and the economies that
Tutorial 1:
Chapter 1:
1. Consider the following two bond issues.
Bond A: 5% 15-year bond
Bond B: 5% 30-year bond
Neither bond has an embedded option. Both bonds are
trading in the market at the same yield.
Which bond will fluctuate more in price when int
DEBT SECURITIES
ASSIGNMENT
La Trobe University (Bundoora Campus)
Lecture:
Contents
Mr Hui (Michael) Li
DEBT SECURITIES ASSIGNMENT
Executive Summary.1
I.
Introduction.1
1.
Purpose.1
2.
Scope & Methodology.2
3.
Limitation.2
II.
Economic and Industry Overvie
1
Z-score model
The Z-score is computed as following:
Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 1.0X5
Factor
Ratios
2012
s
X1
working capital
total asset
323, 249 306, 298
1, 240,897
X2
return earnings
total asset
X3
pre tax profit
total asset
X4
market value
Profitability Ratio
25.00%
20.00%
15.00%
Series 3
10.00%
5.00%
0.00%
2009
2010
2011
2012
ROE measures how much the generating profit of company from each dollar of
shareholders equity. From the graph, ROE from 2009 to 2011 decreased slightly by 1% to
2%,
Faculty of Business, Economics and Law
La Trobe Business School
DEBT SECURITIES (FIN5DBS)
SEMESTER 1, 2012
ASSIGNMENT
Due Date: 12:00 noon, Friday 25th May 2012
Topic
Based on the publicly available information relating to David Jones Limited
(ASX Code:
DEBT SECURITIES (FIN5DBS) SAMPLE EXAMINATION PAPER
SEMESTER 2, 2012
SECTION A
1) Which of the following statements relating to the risk exposure from investment in
US treasury securities is incorrect?
a)
b)
c)
d)
All Treasury securities are exposed to in
Formulae sheet
CPR = 1 (1 SMM ) 12
1/12
SMM = 1 (1 CPR )
CPR = 6% ( t / 30 )
r (1 + r ) n
MP = B
n
(1 + r ) 1
Prepayment = SMM ( Beg Mort Bal Sched Princ Pmt )
V V
Duration = +
2V0 ( y )
Convexity =
Pdirty
V+ + V 2V0
c (1 + r )
=
r
2V0 ( y )
(1- )
2
FACULTY OF LAW AND MANAGEMENT
ASSIGNMENT
DEBT SECURITIES (FIN5DBS)
Credit Rating Analysis
David Jones Limited
DAVID JONES CREDIT RATING 2013
CONTENTS
EXECUTIVE SUMMARY.4
I.
MACROECONOMICS ANALYSIS.5
1.1 Global market.5
1.2 Australian Market.6
II. INDUSTRY
DEBT SECURITIES
1.
Semester 1 2009: Quiz 5 Solutions Version B
Calculate the Weighted Average Maturity (WAM) for the following
pool of loans.
Loan
1
2
3
4
5
Outstanding
balance
$145,000
$87,000
$122,000
$95,000
$79,000
Weight in
pool
18.12%
24.34%
21.55%
DEBT SECURITIES
Semester 1 2009: Quiz 4 Solutions Version A
1. On the following diagram, sketch an overall increase in interest
rates with a negative butterfly shift.
Yield
Initial curve
Maturity
2. What have historically been the most significant and the
DEBT SECURITIES
Semester 1 2009: Quiz 3 Solutions Version C
1. Calculate the yield to maturity of a 5.6% 20-year bond that pays
interest semiannually and is selling for $85.05.
To
Enter number of periods
Enter coupon payment
Enter future value
Enter prese
DEBT SECURITIES
Semester 1 2009: Quiz 3 Solutions Version A
1. Calculate the yield to maturity of a 5.6% 20-year bond that pays
interest semiannually and is selling for $95.38.
To
Enter number of periods
Enter coupon payment
Enter future value
Enter prese
DEBT SECURITIES
Semester 1 2009: Quiz 3 Solutions Version B
1. Calculate the yield to maturity of a 5.6% 20-year bond that pays
interest semiannually and is selling for $95.38.
To
Enter number of periods
Enter coupon payment
Enter future value
Enter prese
DEBT SECURITIES
Semester 1 2009: Quiz 2 Solutions
1. Suppose that the yield on a 5-year non-callable corporate bond is
6.54% and the yield for the on-the-run 5-year Treasury is 5.20%.
Calculate the absolute yield spread.
Absolute Spread 6=
.54% 5.20% 1.34
DEBT SECURITIES
1.
Semester 1 2009: Quiz 1 Solutions
Why can an accelerated sinking fund be viewed as an embedded call
option granted to the issuer?
An accelerated sinking fund provision grants the issuer the right to redeem
more than the minimum amount n
Executive summary
Through this report, we attempt to find a true and reliable credit rating for one of the
leading retailing company David Jones Limited (DJS).
The reason for giving DJS a credit rating is because the issuer usually seeks for a
credit rati
Tutorial week 2
Chapter 1 SOLUTIONS
1. All other factors constant, the longer the maturity, the greater the price
change when interest rates changes. So, Bond B is the answer.
4. a. This provision is a make-whole redemptions (also called a yield
maintenan
Week 8 Tutorial
Chapter 7 SOLUTIONS
1. While it is true that a disadvantage of the full valuation approach is that it
requires revaluating the bond in the portfolio, it is not true that the
duration/convexity approach does not require a valuation model. A
Tutorial Week 11
1. a.
b.
2. a. The monthly servicing fee is found by dividing the servicing fee of
0.005(50 basis points) by 12. The monthly servicing fee is therefore
0.0004167. Multiplying the monthly servicing fee by the beginning
mortgage balance giv
DEBT SECURITIES
Topic 9: Valuing bonds with embedded options
Faculty of Business, Economics and Law
Valuing bonds with embedded options
Student learning objectives
9.1 Evaluate whether a security is undervalued or
overvalued, given an appropriate benchmar
DEBT SECURITIES
Topic 4: Bond Valuation
Faculty of Law and Management
Bond valuation
Student learning objectives
4.1 Explain the steps in the bond valuation process (i.e.,
estimate expected cash flows, determine an appropriate
discount rate or rates, and
DEBT SECURITIES
Topic 1: Features of debt securities
Faculty of Law and Management
Features of debt securities
Student learning objectives
1.1
1.2
1.3
1.4
1.5
1.6
Describe the basic features of a bond;
Identify the various coupon rate structures;
Define a
DEBT SECURITIES
Topic 7: Interest rate risk
measurement
Faculty of Business, Economics and Law
Interest rate risk measurement
Student learning objectives
7.1 Understand the full valuation approach (the
scenario analysis approach) for measuring interest
ra
DEBT SECURITIES
Topic 8: Term structure of
interest rates
Faculty of Business, Economics and Law
Term structure of interest rates
Student learning objectives
8.1 Understand shape of the yield curve and illustrate and
explain parallel and non-parallel shif
DEBT SECURITIES
Topic 11: Asset backed securities
Faculty of Business, Economics and Law
Asset Backed Securities
Student learning Objectives
11.1 Illustrate the basic structural features of and parties
to a securitisation transaction;
11.2 Explain prepaym
DEBT SECURITIES
Topic 6: Credit analysis
Faculty of Law and Management
Credit analysis
Student learning objectives
6.1 Distinguish among default risk, credit spread risk and
downgrade risk and illustrate the rating process;
6.2
Understand the measurement