Reference no: EM131495502
Assume all rates are annualized with semi-annual compounding. Please be explicit about how you derive your results and round to four decimals after the comma. The current price of $1 par of a zero maturing at time 2 is $0.97
a. What is the 2-year spot rate?
b. What is the dollar duration of $1 par of the 2-year zero?
The current price of $1 par of a zero maturing at time 3 is $0.92
c. What is the 3-year spot rate?
d. What is the dollar duration of $1 par of the 3-year zero?
You can enter into a forward contract today to buy, at time 2, $1 par of a zero maturing at time 3. The price you would pay at time 2 is the forward price. The cost today of entering into this contract is zero.
e. Construct a portfolio of 2- and 3-year zeroes that synthesizes this forward contract.
f. What is the no arbitrage forward price?
g. What is the dollar duration of the forward contract?
|
Zero rates with annual compounding are as with maturity
: Suppose that OIS zero rates with annual compounding are as follow with maturity of 1, 2, 3, 4 years: 2.5%, 2.7%, 2.9%, and 3.0% respectively.
|
|
Same market value and duration as your liabilities
: You want to immunize your position by constructing a portfolio of two assets below that has the same market value and duration as your liabilities.
|
|
Calculate the beta of the stock
: The correlation coefficient between stock B and the market portfolio is 0.8. Calculate the beta of the stock.
|
|
Determine the capitalized cost for maintaining the statue
: Assuming an interest rate of 4% year compounded quarterly, determine the capitalized cost for maintaining the statue.
|
|
What is the dollar duration of the forward contract
: Assume all rates are annualized with semi-annual compounding. What is the dollar duration of the forward contract? What is the no arbitrage forward price?
|
|
Rates are annualized with semi-annual compounding
: Assume all rates are annualized with semi-annual compounding.Use dollar duration to estimate the change in value of $1,000 par of the 1-year 10%-coupon bond
|
|
What is the rate of return on your investment
: Assume all rates are annualized with semi-annual compounding. What is the rate of return on your investment (annualized, with semi-annual compounding)?
|
|
Assume all rates are annualized with semi-annual compounding
: Assume all rates are annualized with semi-annual compounding.
|
|
What is meant by perfect positive correlation
: What is meant by perfect positive correlation, perfect negative correlation, and zero correlation?
|