Question;Midterm;Rules: The Excel questions need to be done in;the accompanying Excel file. You will email this exam copy and the Excel file;by due date. If you are unable to write the formulas in MS Word then you will;write them by hand and scan the exam and email the exam and excel file by due;date.;1. Classify the following financial;instruments as money market securities or capital market securities in a table;a. Bankers Acceptance b.;Commercial papersc. Common Stock d.;Corporate Bonds;e. Mortgages f.;Negotiable Certificate of Deposits g. Repurchase Agreements;h. U.S. Treasury Bills i. U.S. Treasury Notes j. Federal Funds;2. Calculate the present value for the;following: (Excel);a. $5,000 received at the end of 5;years if your investments pay 6% compounded annually.;b. $5,000 received each year for 5;years on the last day of each year if your investments pay 6% compounded;annually.;c. $5,000 received each quarter for 5;years on the last day of each quarter if your investments pay 6% compounded;annually.;d. $5,000 received each year for 5;years on the first day of each year if your investments pay 6% compounded;annually.;3. Go to Wall Street Journal Market;Data Center and find the most active investment grade bonds. Choose one bond;from the list. Also, find the treasury yield of the 30 year bond on August 01;2013 from U.S. Treasury. Then, calculate the Default Risk Premium for your;bond. (Be clear in the name of the company you have chosen.);4. If we observe a one-year Treasury;security rate higher than the two-year Treasury security rate, what can we;infer about the one-year rate expected one year from now?;5. Calculate the following values in Excel.;a. A 10-year, 12 percent semiannual;coupon bond, with a par value of $1,000 sells for $1,100. What is the bond?s;yield to maturity?;b.A 8 percent semiannual coupon bond;with a par value of $1,000 sells for $895. If the bond?s yield to maturity is;5% then what is maturity of the bond in years?;c. A 10 year, 8 percent semiannual;coupon bond, with a par value of $1,000 and yield to maturity is 5%. What is;price of the bond?;6. Calculate the fair present value of;a bond that pay interest semiannually, has a face value of $1,000, has 14 years;remaining to maturity, has a required rate of return of 10 percent and 8 coupon;rate. (Write down the formula and solve it either by calculator or excel);7. A stock just paid an annual dividend;of $2.50. Dividends are expected to grow at 1.5 percent. If the required rate;of return on the stock is 12 percent, what is the fair present value? How is;your answer change if the required rate of return is 15 percent?;(Write;down the formula and solve it either by calculator or excel);8. Why Fed cannot;choose both interest rate targeting and money supply targeting? Explain using graphs.;9. What is the difference between a;discount yield and bond equivalent yield? Which yield is used for Treasury bill;quotes?;10. Write the differences between the;following in a tabular form;a. T-Bills, T-Notes and T-Bonds;b. General Obligation Bonds and;Revenue Bonds;c. Bearer bonds and Registered bonds;d. Term bonds and Serial bonds;11. What is the bid price of a $10,000;face value T-bill with a bid rate of 2.35 percent if there are 50, 100, and 250 days to maturity? (Write;down the formula and solve it either by calculator or excel);12. You plan to purchase a $ 100,000;house using a 30- year mortgage obtained from your local credit union. The mortgage;rate offered to you is 8.25 percent. You will make a down payment of 20 percent;of the purchase price. (Excel);a. Calculate your monthly payments on this mortgage.;b. Calculate the amount of interest and principal paid for all payments.;c. Calculate the amount of share of interest;and share of principal of the monthly payments for all payments.;d. Calculate the amount of interest paid over the life of this mortgage.;13. At the beginning of the year, you;purchased a share of stock for $40. Over;the year the dividends paid on the stock were $5.00 per share. Calculate the return on a stock if the price;of the stock at the end of the year is $30 and $50. (Write down the formula and solve;it either by calculator or excel);14. Assume there are 5 stocks: A, B, C;D, E of 5 different firms. You are to calculate an index using their prices and;values. Say the prices of these stocks today are 25, 30, 50, 20, and 60;respectively. The firms have 100m, 80m, 120m, 200m and 250m shares outstanding;respectively.;a. what is the price-weighted index for today?;b. what is value-weighted index for today?;Assume that;the price changes to 20, 25, 55, 18, and 50 respectively next day.;c. What is the new price-weighted index for next day? Calculate the;percentage change in the price-weighted index?;d. What is the new value-weighted index for next day? Calculate the;percentage change in the value-weighted index?;Assume that;firm E divides the stock using a two-for-one split formula. What will be the;new divisor for the price-weighted index?;(Write;down the formula and solve it either by calculator or excel);15. You have taken a long;position in a call option on IBM common stock. The option has an exercise price;of $136 and IBM?s stock is currently trading at $140. The option premium is $5;per contract.;a. What is your net profit on;the option if IBM?s stock price increases to $150 at expiration of the option;and you exercise the option?;b. What is your net profit on;the option if IBM?s stock price decreases to $130 at expiration of the option?
Paper#51522 | Written in 18-Jul-2015Price : $37