Bond: 1. Accrued interest: If there are 183 days between interest settlement dates and it is 50 days since the last payment. The coupon rate is 3.5%. The quoted price is $950. The face value is $1000. What is the clean price? What is the accrued interest? What is the price that investors pay? 2. A bond pays semi-annual coupon of $40. In half a year, price increases from $950 to $1000. a) what is the capital gain yield? b) what is the income yield? c) what is the holding period return in this half a year? Fixed Income: 3. Describe variables that affect demand and supply for bonds? How do the supply curve and demand curve shift if the variables increase? 4. Consider a bond with a 7 percent semi-annual coupon and a face value of $1000. Complete the following table. Note that yield to maturity is quoted annually. Describe the relation between bond price and yield to maturity. Years to Maturity Yield to Maturity(percent) Current Prices 3 5 3 7 6 7 9 8 9 950 5. One-year T-bill rates over the next four years are expected to be 3%, 4%, 5%, and 5.5%. If four-year T-bonds are yielding 4.5%, what is the liquidity premium on this bond? 6. If a 90 day Canadian promissory note for $1,000 is sold for a 1% discount. What is its effective yield? Note all yields are quoted annually. Equity: 7. Dividend at present is $4, equity cost is 10%, and growth rate is 5%. What is the equity price?
Paper#6973 | Written in 18-Jul-2015Price : $25