Questions from Business Statistics


Q: Suppose that risk-free zero interest rates with continuous compounding are

Suppose that risk-free zero interest rates with continuous compounding are as follows: Calculate forward interest rates for the second, third, fourth, fifth, and sixth quarters.

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Q: Investigate what happens as the width of the mezzanine tranche of the

Investigate what happens as the width of the mezzanine tranche of the ABS in Figure 8.3 is decreased with the reduction of mezzanine tranche principal being divided equally between the equity and seni...

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Q: Assuming that risk-free zero rates are as in Problem 4

Assuming that risk-free zero rates are as in Problem 4.5, what is the value of an FRA where the holder will pay LIBOR and receive 4.5% (quarterly compounded) for a three month period starting in one y...

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Q: The term structure of interest rates is upward-sloping. Put

The term structure of interest rates is upward-sloping. Put the following in order of magnitude: (a) The 5-year zero rate (b) The yield on a 5-year coupon-bearing bond (c) The forward rate correspondi...

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Q: What rate of interest with continuous compounding is equivalent to 8%

What rate of interest with continuous compounding is equivalent to 8% per annum with monthly compounding?

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Q: A U.S. Treasury bond pays a 7% coupon

A U.S. Treasury bond pays a 7% coupon on January 7 and July 7. How much interest accrues per $100 of principal to the bondholder between July 7, 2017, and August 8, 2017? How would your answer be diff...

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Q: Suppose that the Treasury bond futures price is 101-12.

Suppose that the Treasury bond futures price is 101-12. Which of the following four bonds is cheapest to deliver?

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Q: Suppose that a bond portfolio with a duration of 12 years is

Suppose that a bond portfolio with a duration of 12 years is hedged using a futures contract in which the underlying asset has a duration of 4 years. What is likely to be the impact on the hedge of th...

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Q: On August 1, a portfolio manager has a bond portfolio worth

On August 1, a portfolio manager has a bond portfolio worth $10 million. The duration of the portfolio in October will be 7.1 years. The December Treasury bond futures price is currently 91-12 and the...

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Q: How can the portfolio manager change the duration of the portfolio to

How can the portfolio manager change the duration of the portfolio to 3.0 years in Problem 6.17? Data from 6.17: On August 1 a portfolio manager has a bond portfolio worth $10 million. The duration o...

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