加拿大mba金融财务管理硕士作业-固定收益课

解答题：
Answer the questions in the space provided. Please be sure to show sufficient work so that I can award partial grades, if necessary.


1. You manage a bond portfolio. One day you observe two federal government bonds in your portfolio that have the following characteristics:
 
You have a strong opinion that the yield curve will become steeper (that is, more upward sloping) in the near future, but you have no strong opinion about the general level of bond yields.


You wish to devise a trade to attempt to capitalize on your view of a steeper yield curve, but in a way that does not change your portfolio's exposure to movements in the overall level of interest rates.
Devise such a trade using the bonds noted above. You will use $50 million (face value) of Bond 1 in the trade. Be sure to mention the amount, in terms of par value, of each bond that you will use and whether you would buy or sell each bond. [5 points]


2. All interest rates in this question are quoted as APR payable semiannually. The current swap curve is provided below. A bootstrap process has been performed for you and the relevant discount factors are provided. Do not waste your time computing them! Use this information to answer the following questions.

 
a. A company can issue floating rate debt at LIBOR - 25 bps for a 3-year term. What fixed rate can you lock in for that same term using an interest rate swap? (Hint: before launching into very involved calculations, think a moment. This question is very straightforward.)

b. You are presently receiving 4% APR payable semiannually in exchange for LIBOR reset semi-annually on a swap that will expire in 3 years. The most recent payment was made today. What is the value of the existing swap to you if the notional principal amount is $50 million? Make sure you are clear if the value is positive or negative.


3. You observe the following discount factors that are derived from interest rates observed today. Use this information to answer the following questions.

a. Suppose you have an existing forward rate agreement (FRA) that commits you to receive a rate of interest of 7% per year, payable semi-annually, on a principal amount of $10,000,000, for a 6-month period that begins in 3 months (i.e. 0.25 years). How much must you pay, or would you demand to be paid, to cancel this FRA today? Be clear about whether you would make or receive the payment.

b. Suppose you can purchase a one-year floating rate note that pays interest at the rate of 3-month LIBOR + 40 basis points, reset quarterly. You are concerned that interest rates are going to fall, so you wish to buy a floor on LIBOR with a strike of 5% (APR, payable quarterly). Suppose you know the floor would cost 0.25% of notional value if you paid for it entirely today. You prefer to pay for the floorby deducting a spread from the floating rate note’s quarterly coupon payment on each quarterly interest payment over the term of the loan. Given this information, what will your net coupon income be from holding the floating rate note plus the floor? State this as LIBOR plus a net spread, quoted as an annual rate payable quarterly.


选择题：
1. A coupon bond is reported as having a price of 110.25 in the Wall Street Journal. If the last interest payment was made one month ago and the coupon rate is 9%, the invoice price of $1000 face value of the bond will be ____________. You may assume that one month is exactly 1/12 of a year.


A. $1,102.50
B. $1,110.00
C. $1,150.00
D. $1,160.25
E. None of these is correct.


2. A coupon bond that pays interest semi-annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10% APR, payable semi-annually. The intrinsic value of the bond today will be __________ if the
coupon rate is 12% (annual rate paid semi-annually).


A. $922.77
B. $924.16
C. $1,075.80
D. $1,077.22
E. None of these is correct.


3. You have just purchased a 10-year zero-coupon bond with a yield to maturity of 10% (effective annual rate) and a par value of $1,000. What would your rate of return at the end of the year be if you sell the bond? Assume the yield to maturity on the bond is 11% (effective annual rate) at the time you sell.


A. 10.00%
B. 20.42%
C. 13.8%
D. 1.4%
E. None of these is correct.


4. Interest rates might decline


A. because real interest rates are expected to decline.
B. because the inflation rate is expected to decline.
C. because nominal interest rates are expected to increase.
D. A and B.
E. B and C.






5. The following is a list of prices for zero coupon bonds with different maturities and par value of $1,000.
 
What is, according to the unbiased expectations theory, the expected one-year interest rate for a one-year period beginning at the end of year 2, stated as an effective annual rate?


A. 7.00%
B. 7.33%
C. 9.00%
D. 11.19%
E. None of these is correct.


6. Which of the following combinations will result in a sharply increasing yield curve?


A. increasing expected short-term interest rates and increasing liquidity premiums
B. decreasing expected short-term interest rates and increasing liquidity premiums
C. increasing expected short-term interest rates and decreasing liquidity premiums
D. increasing expected short-term interest rates and constant liquidity premiums
E. constant expected short-term interest rates and increasing liquidity premiums


7. Suppose the interest rate is 6% per annum, compounded semi-annually, for all maturities. What (to the nearest cent) is the value of an FRA to the holder where the holder receives interest at the rate of 7% per annum, compounded semi-annually, for a six-month period starting in two years on a principal of $10,000?


A. $350
B. $50
C. -$43.13
D. $43.13
E. -$50


8. Suppose you had the following information about discount factors (that is, the present value of a dollar coming at various times in the future).
 
Given these discount factors, which value below is closest to the theoretical par bond yield on a 3-year par bond where coupon payments are made annually (expressed as EAR)?


A. 4.67%
B. 5.65%
C. 5.587%
D. 4.777%


9. Which of the following two bonds is more price-sensitive to changes in interest rates?


1) A par value bond, X, with a 5-year-to-maturity and a 10% coupon rate.
2) A zero-coupon bond, Y, with a 5-year-to-maturity and a 10% yield-to-maturity.


A. Bond X because of the higher yield to maturity.
B. Bond X because of the longer time to maturity.
C. Bond Y because of the longer duration.
D. Both have the same sensitivity because both have the same yield to maturity.
E. None of these is correct.


10. Consider a bond selling at par with modified duration of 10.6 years and convexity of 210. A 2 percent decrease in yield would cause the price to increase by 21.2%, according to the duration rule. What would be the percentage price change according to the duration-with-convexity rule? [Hint: Think about what convexity means before you go to look up formulas. This is easier than it appears at first glance.]


A. 21.2%
B. 25.4%
C. 17.0%
D. 10.6%


11. Suppose you have a short position in a $20 million face value of a fixed-rate corporate bond that matures in 10 years. Which of the following strategies would most effectively hedge the interest rate risk inherent in this position?


A. Hold a short position in government bond futures where the duration of the futures position is matched to that of the corporate bond position.
B. Pay fixed on a fixed-for-floating swap where the fixed payment dates match the coupon dates of the corporate bond.
C. Receive fixed on a fixed-for-floating swap where the fixed payment dates match the coupon dates of the corporate bond.
D. Take a long position in Eurodollar futures contracts where the duration of the futures position is matched to that of the corporate bond position.


12. Which of the following statements is true?


A. Principals are not usually exchanged in a currency swap
B. The principal amounts usually flow in the opposite direction to interest payments at the beginning of a currency swap and in the same direction as interest payments at the end of the swap.
C. The principal amounts usually flow in the same direction as interest payments at the beginning of a currency swap and in the opposite direction to interest payments at the end of the swap.
D. Principals are not usually specified in a currency swap