- Submitted By: 秀端-廉
- Date Submitted: 02/29/2016 7:22 AM
- Category: History Other
- Words: 7647
- Page: 31

Quiz 1 Solutions, F2

1. The spot rates for 1 year and 2 years are 4% and 5%, respectively. What is

the 1-year rate 1-year forward?

a.

b.

c.

d.

5.01

4.56

6.01

9.61

(1.04)(1+f) = 1.05^2

Answer (c)

2. An upward sloping term structure implies, for the most part

a.

b.

c.

d.

Decreasing forward rates

Increasing forward rates

Forward rates all equal

Forward rates can’t be determined

Answer (b)

3. The three successive 1-year rates are 1.00, 1.80, and 2.60 (the last two are

forward rates). What is the 3-year spot rate?

a.

b.

c.

d.

1.55

1.80

5.49

2.60

(1.01*1.018*1.026) = (1+r)^3 = (1.01*1.018*1.026)^1/3 - 1

Answer (b)

4. In our context (fixed income class) TIPS are:

a. Inflation protected securities issued by corporations

b. The pointed or rounded end or extremity of something slender or

tapering

c. Amount of money added to restaurant bill to help waiters pay for college

d. Inflation protected securities issued by the government

Answer (d)

1

5. Accrued interest

a.

b.

c.

d.

Is the difference between flat and full prices

Is the difference between full and dirty prices

Is the difference between quoted and clean prices

Is the sum of accumulated value and clean prices

Answer (a)

6. The 5 1/10 s of 11/15/2027 pay coupons on February 1 and August 1 of each

year. If a bond with face value of $3,000 is sold on May 1, and assuming

30/360 convention, what is the amount of the accrued interest?

a.

b.

c.

d.

$3.75

$11.33

$38.25

$111.11

C: $3,000 (90/180) (5.1%/2) = 38.25

Answer (c)

7. The yield measure that ignores the time value of money is

a.

b.

c.

d.

Yield to maturity

Current yield

IRR

Yield to call/put

Answer (b)

8. [Circle all the correct answers]. A US Treasury bill

a.

b.

c.

d.

Is a zero-coupon security

Is sold at par

Has a maturity of one year or less

Is sold at a discount

Answer (a,c,d)

For problems 9-10 below, you are given the following par bonds with the...