Questions on Bond Pricing
3. Answer the following questions.
(a) The portfolio manager of a tax-exempt fund is considering investing $500,000 in a debt
instrument that pays an annual interest rate of 5.7% for four years. At the end of four
years, the port
Term Structure of Interest Rates
1. In the September 13, 1996, Weekly Market Update published by Goldman, Sachs & Co.,
the following information was reported in various exhibits for the Treasury market as of
the close of business Thursday, September 12, 1
Questions On Yield Measure
1. A debt obligation offers the following payments:
Years from Now Cash Flow to Investor
Suppose that the price of this debt obligation is $7,704. What is the yield or internal rate of
CH. 11: Introduction to Risk, Return
and the Opportunity Cost of Capital
Measuring rates of return
The total return on an investment is made up of:
Income (dividends or interest payments).
Capital gains (or losses).
Percentage Return = Capital Gain
CH. 16: Debt policy
How Borrowing Affects Value in a Tax Free Economy
The value of a firm from two angles:
A firms capital structure is the mix of debt and equity its financial managers choose.
Does the choice of capital structure affect the value of a
CH 13: The Weighted-Average
Cost of Capital
Geothermals Cost of Capital
Capital Structure - The firms mix of long-term
financing [debt and equity].
Cost of Capital - The return the firms investors
could expect to earn if they invested in secur
CH. 12: Risk, Return and Capital
Measuring market risk
Unique risk and market risk
Unique risk arises from events that affect only the individual
firm and it can be eliminated by diversification.
Market risk or systematic risk is the risk t
CH. 18: Payout Policy
Payment of cash by a firm to its shareholders.
Forms of cash dividends
Regular cash dividends: Public companies usually pay regular cash
dividends four times a year. The term regular indicates that the firm
CH. 15: Venture Capital, IPOs and
The initial public offering
IPO: A firms first offering of stock to the general public is
called an initial public offering and the firm is said to go public.
Stock market can be either organized ex
CH. 14: Corporate Financing
Common stock: Terminology
The term common stock (or, common shares) means different things to
different people, but is usually applied to stock that has no special
preference either in dividends or bankruptcy.
Owners of commo
CH 26: Risk Management
Derivatives, hedging, and risk
A derivative is a financial instrument whose
payoffs and values are derived from, or
depend on, something else (the underlying).
Types of traders
Treasury and Agency Securities Markets
1. What are the differences among a Treasury bill, Treasury note, and Treasury bond?
Fixed-principal Treasury securities are fixed-income principal securities that include Treasury
bills, Treasury notes, and Treasury
Duration and Convexity
2. Calculate the requested measures in parts (a) through (f) for bonds A and B (assume that
each bond pays interest semiannually):
Bond A Bond B
Yield to maturity
MATH 4310/ MATH 3111
Topology of C
Open balls (disks) B(z0 , r) in the complex plane are specified by a centre z0 C and a radius
r > 0,
B(z0 , r) = cfw_z C : |z z0 | < r,