Question 21 of 71 You’re comparing 4 strategies for a 365-day investment. Which

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Question 21 of 71

You’re comparing 4 strategies for a 365-day investment. Which one offers the highest holding period yield (the yield over the entire period)?

·      365-day CD with a MMY of 9.86%

·      182.5 day CD at 9.63% MMY, then reinvested at same MMY for remaining 182.5 days

·      91.25 day CD at 9.57% MMY, reinvested in 91.25 day CDs at same MMY until 365 days.

·      30.42 month CD at 9.44% MMY, reinvested in 1 month CDs at same MMY until end of 12 months

·      All 4 straggles generate an identical holding period yield

Question 22 of 71

What is the discount on a 360-day T-bill priced at 90?

·      10.00%

·      10.96%

·      11.11%

·      11.13%

·      11.28%

Question 23 of 71

You buy a newly issued 182-day $1m US T bill at 3.00% discount. 30 days later you sell the T-bill at a 2.50% discount. What is your holding period (30 day) yield?

·      0.468%

·      0.46%

·      0.52%

·      1.328%

·      A loss of 1.061%

Question 24 of 71

A bond has a coupon rate of 8.5% and matures in 15 years. The next semiannual interest payment will be paid in two months. Which one of the following will definitely happen with this bond?

·      The bond will sell at a discount.

·      The bond will sell at a premium.

·      The dirty price will be higher than the clean price.

·      The clean price will be higher than the dirty price.

·      The market price will be greater than the par value.

Question 25 of 71

Today, August 20, you are buying a bond from a dealer with a quoted price of 104.597. The bond pays interest on March 1 and September 1. The invoice price you pay for this purchase will equal ...

·      the clean price.

·      the dirty price.

Question 26 of 71

A 4% S/A coupon bond with 4 coupons remaining has a BEY of 8.00%. You buy the bond a little over a month before you get the first coupon. Specifically, the fraction of the 6-month period that has already elapsed is 0.80. Calculate the dirty price of this bond.

·      81.370

·      85.216

·      93.471

·      95.696

Question 27 of 71

What is the clean price of the following bond?

Settlement date:

4/1/2016

Maturity date:

9/14/2019

Last coupon pre settlement

3/14/2016

First coupon post settlement

9/14/2016

Day count convention

30/360

Coupon rate (annual rate)

5.00%

Coupon payment frequency

Semi-annual

BEY (quoted yield)

2.00%

·      108.562

·      109.026

·      109.955

·      109.960

·      110.196

Question 28 of 71

What is the bond equivalent yield of the following bond?

Settlement

7/1/2016

Maturity

12/15/2022

Last coupon pre settlement

6/15/2016

First coupon post settlement

12/15/2016

Clean price

85.000

Par

100.000

Coupon rate (annual rate)

6.00%

Coupon frequency

Semi-annual

Day count convention

Actual/actual

·      9.333%

·      9.167%

·      9.125%

·      9.124%

·      5.820%

Question 29 of 71

For the IBM bond quote below, assuming a settlement date of 8/25/14, what is the dirty price of this bond? Use the bid price when calculating dirty price.

·      113.055

·      113.357

·      115.595

·      115.604

·      116.054

Question 30 of 71

What is the realized compound yield (RCY) of a 5-year 6% annual coupon bond priced at 85 assuming reinvestment rate of 5%.

·      6.52%

·      6.62%

·      9.39%

·      9.50%

·      11.33%

Question 31 of 71

Using the data in Question 30, calculate the holding period yield assuming you sold the bond at year 2 (right after receiving your second coupon) at a price of 90.

·      3.98%

·      9.39%

·      9.54%

·      9.71%

·      20.35%

Settlement date:

4/1/2016

Maturity date:

9/14/2019

Last coupon pre settlement

3/14/2016

First coupon post settlement

9/14/2016

Day count convention

30/360

Coupon rate (annual rate)

5.00%

Coupon payment frequency

Semi-annual

BEY (quoted yield)

2.00%

Explanation / Answer

Answer  21 of 71

You’re comparing 4 strategies for a 365-day investment. Which one offers the highest holding period yield (the yield over the entire period)?

All 4 straggles generate an identical holding period yield

Answer 22 of 71

What is the discount on a 360-day T-bill priced at 90?

Dicount rate =r ,T-bill has face value = 100

=> 100/ (1+r) =90 => r = 11.11% option C.

Answer 23 of 71

You buy a newly issued 182-day $1m US T bill at 3.00% discount. 30 days later you sell the T-bill at a 2.50% discount. What is your holding period (30 day) yield.

At 1st purchase , maturity time = 182 /360= 0.5056 , purchase price = 1/( 1+3%)^ 0.5056 = 0.985167 millions

At 2nd purchase , maturity time = 152/360= 0.4222 , purchase price = 1/( 1+2.5%)^ 0.4222 =0.989628 millions

Net yield =( 0.989628 -0.985167) /0.985167 => 0.46 %

Answer 24 of 71

A bond has a coupon rate of 8.5% and matures in 15 years. The next semiannual interest payment will be paid in two months. Which one of the following will definitely happen with this bond?

·      The dirty price will be higher than the clean price.

As dirty price = clean price + accured interest

Answer 25 of 71

Today, August 20, you are buying a bond from a dealer with a quoted price of 104.597. The bond pays interest on March 1 and September 1. The invoice price you pay for this purchase will equal ...

·      the dirty price.

Invoice price is always higher than clean price,as it may include interest accured or/and brokerage .

Note : As per Chegg rule : kindly put remaining questions as next question

St 1 st 2 st3 st4 Principle 100 100 100 100 Rate(annual) 9.86% 9.63% 9.57% 9.44% Time 365 days 182.5 days 91.25days 30.42 days Maturity value 109.86 109.86 109.9 109.86

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