+1-415-670-9189
info@expertsmind.com
Theory of interest - term structure of interest rates
Course:- Accounting Basics
Reference No.:- EM13494




Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Accounting Basics

1.  The current price of a bond is $114.72 and the current yield is 6.00%. The modified duration of the bond is 7.02. Use the modified duration to estimate the price of the bond if the yield increases to 6.10%.

A.114    B.120    C.210    D.220    E.300
 
2.  A two-year bond has 8% annual coupons payable semiannually. The bond's yield is 10% compounded semiannually. Calculate the modified duration of the bond.

A.0.8    B.1.0    C.1.5    D.1.8    E.2.0 ok
 
3.  A 22-year bond pays 7% annual coupons and has a current price of $81.12. The annual effective yield on the bond is 9%. The Macaulay duration of the bond is 10.774. Estimate the new price if the yield falls to 8.95%.

A.76    B.78    C.80    D.82    E.84
 
4.  A 15-year mortgage is repaid with level monthly payments. The yield is 12% compounded monthly. Calculate the Macaulay duration of the mortgage.

A.3.2    B.5.4    C.7.1    D.9.7    E.10.3
 
5.  A 20-year bond yielding 9% has a price of $127.79. If the bond's yield falls to 8.75%, then the price of the bond will increase to $130.65. If bond's yield increases to 9.25%, then the price of the bond will fall to $125.02. Calculate the effective duration of the bond.

A.8.6    B.8.7    C.8.8    D.8.9    E.9.0
 
6.  A five-year bond with a coupon of 6.7% pays coupons semiannually. It is currently yielding 6.4%. Its current price is $101.2666. If the bond's yield increases by 10 basis points, then its price falls to $100.8422. If the bond's yield falls by 10 basis points, then its price rises to $101.6931. Calculate the effective convexity of the bond.

A.15.67  B.17.75  C.18.52  D.19.32  E.20.74
 
7.  The modified duration of an 8-year bond is 5.35 and its convexity is 39.19. Estimate the percentage change in the price of the bond if its yield increases by 63 basis points.

A. -3.29%  B.-1.09%  C.1.09%  D.3.29%  E.5.14%

8.  An insurance company has committed to make a payment of $100,000 in 5 years. The insurance company can fund this liability only through the purchase of 4-year zero-coupon bonds and 10-year zero-coupon bonds. The annual effective yield for all assets and liabilities is 12%. Determine how much the bank should invest in the 4-year zero-coupon bond in order to immunize its position.

A.26401  B.26933  C.47286  D.47813  E.48005

9.  You are given the following information with respect to a callable bond:

675_Theory of Interest.png

  The current yield is 7%.

  Calculate the ratio of the modified duration to the effective duration of this bond.

  A.1.01   B.1.17    C.1.32    D.1.38   E.1.50
 
10. The current price of a bond is 100. The derivative of the price with respect to the yield to maturity is -700. The yield to maturity is 8%.

Calculate the Macaulay duration.
A.8    B.9    C.10    D.11    E.12

11. Given the following annual effective spot rates, find the present value of a 3-year bond paying 15% annual coupons and having a par value of $100.

1104_Theory of Interest1.png

12. Given the following yields and coupons for bonds with $100 of par value, determine the 2-year annual effective spot rate.

1336_Theory of Interest2.png

13. Given the following table of forward rates, find the present value of a 3-year bond paying 15% annual coupons and having a par value of $100.

A.118.66  B.120.24  C.132.86  D.144.12  E.151.97

2045_Theory of Interest3.png




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Accounting Basics) Materials
Assuming no differences between accounting income and taxable income other than those described above, prepare the appropriate journal entry to record Case's 2011 income taxes
A newspaper article contains the following description of New York consumers avoiding the state's 8.375 percent sales tax by shopping in New Jersey: For years, shoppers from
Ratios provide the users of financial statements with a great deal of information about the entity. Do ratios tell the whole story? How could liquidity ratios be used by inv
The purpose: To provide a member of your class with meaningful feedback about his/her draft of the communication audit. The Task: You need to provide your peer with feedback
Pursuant to a complete liquidation, Oriole Corporation distributes to its shareholders land with a basis of $450,000 and a fair market value of $550,000. The land is subject
Jerry transfers two assets to a corporation as part of a Sec. 351 exchange. The first asset has an adjusted basis of $70,000 and a FMV of $50,000. The second asset has an ad
A supplier of DVDs claims that no more than 1% of the DVDs are defective. In a random sample of 600 DVDs, it is found that 3% are defective, but the supplier claims that this
Determining Cash Balance) The controller for Clint Eastwood Co. is attempting to determine the amount of cash to be reported on its December 31, 2014, balance sheet. The follo