Fin 3270 Exam 2 Questions With 100%
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/. 3. Your firm plans to issue a new bond. A municipal bond with the same risk as your
new issue
yields 5.3%. You know that your potential investors have a marginal tax rate of 29%.
Your bond
has to offer at least a _______________________ yield for investors to consider your
bond.
Please report yield in percentage with two decimal places.
...... - Answer-✅7.46%
[X% (1-tax margin) = New yield
X% ( 1-.29) = .053
X%(.71)=.053]
/.Questions 1 and 2: You are a bond trader. You are considering buying a semiannual
bond with a
coupon rate of 3.8% that matures in 15 years. The bond price is now trading for
$919.59. Par
value is $1,000. The bond can be called in 5 years for $1,038.
1. What is the yield to maturity (YTM)? _______________________
Please write in annual yield in percentage with 2 decimal places.
2. What is the yield to call (YTC)? _______________________
Please write in annual yield in percentage with 2 decimal places. - Answer-✅1. 4.55
[
FV= par value = 1000
N= Mature Years *2 = 30
PMT = coupon/2*par = 19
PV = Trading Price NEGATIVE = -919.59
CPT I/Y = 2.27 = *2 = 4.54]
]
2. 6.36
[FV = call price =1038
N = Call Years*2 = 10
PMT= coupon/2*par = 19
PV = Trading Price NEGATIVE = -919.59
CPT I/Y = 3.18 = *2 = 6.36]
, /.4. A T-bond is quoted as 92-06. Assuming a par value of 1000, this bond is trading for
_________________. Report to 2 decimal places. - Answer-✅921.28
[6/32 = .12875
.12875+92 = 92.12875
.9212875*1000]
/.1. All else equal, as coupon rate rises, does duration increase or decrease? - Answer-
✅1. Decrease
/.Questions 5 and 6: A 7-year, 5.4% coupon bond pays interest semiannually and has a
face value
of $1,000. The current yield to maturity is 6.4%.
5. What is the bond's price now? ____________
6. What will be the new price if the yield to maturity rises to 6.6%?
____________________ - Answer-✅944.28
[N= years * 2 = 14
PMT = (coupon in decimal / 2) * par
I/Y = 6.
FV = 1000
CPT PV = ]
933.58
[N= years * 2 = 14
PMT = (coupon in decimal / 2) * par
I/Y = 6.
FV = 1000
CPT PV = ]
/.7. When the maturity rate was 6.4% bond price was 944.28. When maturity rose to
6.6%, bond price was 933.59. Assume the modified duration is 5.7 years. What is the
expected percentage price change
based on modified duration? _________________
What is the true percentage change in price? _________________
% price change = [(Ending price - Beginning price) / Beginning price] x 100 - Answer-✅-
1.14%
[5.7 * (6.6-6.4)
= 1.14]
-1.13%
Pass
/. 3. Your firm plans to issue a new bond. A municipal bond with the same risk as your
new issue
yields 5.3%. You know that your potential investors have a marginal tax rate of 29%.
Your bond
has to offer at least a _______________________ yield for investors to consider your
bond.
Please report yield in percentage with two decimal places.
...... - Answer-✅7.46%
[X% (1-tax margin) = New yield
X% ( 1-.29) = .053
X%(.71)=.053]
/.Questions 1 and 2: You are a bond trader. You are considering buying a semiannual
bond with a
coupon rate of 3.8% that matures in 15 years. The bond price is now trading for
$919.59. Par
value is $1,000. The bond can be called in 5 years for $1,038.
1. What is the yield to maturity (YTM)? _______________________
Please write in annual yield in percentage with 2 decimal places.
2. What is the yield to call (YTC)? _______________________
Please write in annual yield in percentage with 2 decimal places. - Answer-✅1. 4.55
[
FV= par value = 1000
N= Mature Years *2 = 30
PMT = coupon/2*par = 19
PV = Trading Price NEGATIVE = -919.59
CPT I/Y = 2.27 = *2 = 4.54]
]
2. 6.36
[FV = call price =1038
N = Call Years*2 = 10
PMT= coupon/2*par = 19
PV = Trading Price NEGATIVE = -919.59
CPT I/Y = 3.18 = *2 = 6.36]
, /.4. A T-bond is quoted as 92-06. Assuming a par value of 1000, this bond is trading for
_________________. Report to 2 decimal places. - Answer-✅921.28
[6/32 = .12875
.12875+92 = 92.12875
.9212875*1000]
/.1. All else equal, as coupon rate rises, does duration increase or decrease? - Answer-
✅1. Decrease
/.Questions 5 and 6: A 7-year, 5.4% coupon bond pays interest semiannually and has a
face value
of $1,000. The current yield to maturity is 6.4%.
5. What is the bond's price now? ____________
6. What will be the new price if the yield to maturity rises to 6.6%?
____________________ - Answer-✅944.28
[N= years * 2 = 14
PMT = (coupon in decimal / 2) * par
I/Y = 6.
FV = 1000
CPT PV = ]
933.58
[N= years * 2 = 14
PMT = (coupon in decimal / 2) * par
I/Y = 6.
FV = 1000
CPT PV = ]
/.7. When the maturity rate was 6.4% bond price was 944.28. When maturity rose to
6.6%, bond price was 933.59. Assume the modified duration is 5.7 years. What is the
expected percentage price change
based on modified duration? _________________
What is the true percentage change in price? _________________
% price change = [(Ending price - Beginning price) / Beginning price] x 100 - Answer-✅-
1.14%
[5.7 * (6.6-6.4)
= 1.14]
-1.13%
