You observe on the 16th of September, 2001 a US T-Bill maturing on June 16, 2002 trading at a quoted discount rate of 5.75%. You also observe a US T-Bond, coupon 8%, maturing also on June 16, 2002 trading at a price of 101-20. What money market yield would you have to reinvest the T-Bond coupon at to make you indifferent between the two investments?
Assume same day settlement and that all days are all "good" business days. Also assume a 360 day year for the Bill and Act/Actual for the T-Bond accrued interest.
6.10%
8.36%
12.24%
16.10%
17.85%
You observe the following set of Treasury Bond prices on March 15, 2001.
COUPON MATURITY PRICE
6% SEPTEMBER 15,2001 100-16 11% MARCH 15, 2002 105-09
What is the annual par yield on a Treasury Bond maturing on March 15, 2002? The par yield is the redemption yield (yield to maturity) of a bond priced at 100.
4.95%
5.25%
5.51%
5.75%
5.95%
What is the error (actual change minus duration based change) involved in using simple duration to calculate the response of a 5.00% Treasury Bond with two years to maturity to a 100 basis point increase in the yield to maturity (redemption yield) if the original yield to maturity is 6.00%?
N.B. All calculations must be to at least three decimal places.
-0.022
-0.012
0.000
0.012
0.016
You own $10,000,000 nominal of a 6% coupon Eurobond priced at 98.00 with a yield of 6.40%. The duration of this bond is estimated at 5.0 years. How much nominal value (to the nearest thousand US Dollars) of an 8% coupon bond with a price of 105.00, a yield of 6.50% and an estimated duration of 4.0 years would be required to hedge the first bond holding?
Assume absolute equal changes in yields and that today is also a coupon date for both bonds.
Eurobonds are on a 30/360 day accrued interest basis.
$10,982,000
$11,656,000
$11,666,000
$11,678,000
$11,852,000
A 7% T-Bond (for settlement March 22, 2003) has 10 years to maturity and is currently priced at 96-16. (maturity date: March 22, 2013) Calculate the price at which a 10-year zero coupon bond must be priced to give the same annual return.
46.50
47.03
47.46
47.87
48.92
You own $10,000,000 nominal of a 7% coupon eurobond priced at 102.00 with a yield of 6.75%. The duration of the bond is estimated at 6 years. How much nominal value (to the nearest thousand dollars) of a 6% coupon bond with a price of 95.00, a yield of 6.80% and an estimated duration of 7 years would be required to hedge the first bond holding, assuming the yields will change by the same absolute amount.
$8,910,000
$8,998,000
$9,105,000
$9,196,000
$9,207,000
7 Given the following prices for annual coupon bonds, what would be the fair price of a 3 year 9% bond.
MATURITY PRICE COUPON 1 YEAR 100.00 8% 2 YEAR 98.30 7.5% 3 YEAR 97.00 7.25%
100.08
101.00
101.48
101.96
102.54
A Eurobond maturing on September 30, 2004 with a coupon of 6% is trading at 98.00. Assuming the settlement day is September 30, 2000, if the yield falls by 1 percent, how much of the price change can be attributed to duration?
3.3260
3.3738
3.3260
3.3920
3.4003
The rolling or horizon yield on a bond is
The expected return on a bond over a specific period given a specific assumption about market yields and interest rates.
The return on a bond over one year when it is purchased at par.
The yield the market uses to value a zero coupon bond.
The return an investor will earn on a bond held to maturity.
None of the above.
You are offered an opportunity to invest your savings in one of four different bonds. All are of identical credit quality and maturity (ten years); all have the same coupon, paid semi-annually, and all are priced at par (100 pct. of face value). On the limited information you have, which offers worst value?
a straight bond without call or put;
a straight bond with a call exercisable on each coupon date in the last three years of the bond’s life;
a straight bond with a put exercisable on the coupon date at the end of the third year;
a straight bond with a put exercisable on the coupon date at the end of the third and fifth years.
You observe the following set of Treasury Bond prices.
Hence, the fair price of a zero coupon Treasury Bond maturing in 18 months would be:
90-00
90-04
90-06
90-09
90-12
What is the duration of a four year 6% Eurobond trading at a current yield of 5.5%?
Assume a 30/360 accrued interest basis.
3.25 yrs
3.40yrs
3.52yrs
3.68yrs
3.80yrs
You own $25,000,000 nominal of a 5% coupon Eurobond priced at 98.00 with a yield of 5.2623%. The duration of the bond is estimated at 8.10 years. How much nominal value (to the nearest thousand US dollars) of a 6.50% coupon bond with a price of 106.33 and yield of 5.5007%, and an estimated duration of 6.4years would be required to hedge the first bond holding. Assume absolute equal changes in yield and that the current date is a coupon date for both bonds.