Part I. Multiple Choice (4 pts each) I. Consider the following Treasury STRIPs f

Question

Part I. Multiple Choice (4 pts each) I. Consider the following Treasury STRIPs from a 30-year Government Bond that has a face value of $1,000 and a Coupon Rate of 7%, compounded semiannually. The STIP that will mature in 10.5 years is currently priced at $26.91. What is the YTM on this STRIP? b, c. d. 1.26% 3.10% 2.52% .39% 2. Suppose you feel that Tesla's Stock price is going to go up. Which of the following makes sense to do? L Buy a Call IL. Sell a Put III. Sell a Call IV. Buy a Put a. I only b. I and II only c. I and IllI only d. I and IV only 3. Suppose you buy 3 contracts of Gold futures. The spot price of gold is 1,277.60 and each contract is for 100 ounces. The initial margin is 8% day goes to $1,301.21 and you sell the contract. Ignoring any transaction fees and interest expenses, what is the return on your investment? the maintenance margin is $20,000. Suppose the price the nex a. b. c. d. 23.1% 18.2% 1.9% 11.2% Consider a t-bill that has 15 days left until maturity and is priced on a DY of 1.67%. The face value is $100. Given this, what is the Bond Equivalent Yield on the bill? 4. a. b. c, d. 1.74% 1.21% 1.69% 2.29% S. Which of the following is the rate that banks charge each other, but is dictated by the U.S. Federal Reserve? a. Federal Funds Rate b. Prime Rate c. Federal Discount Rate d. LIBOR Rate

Explanation / Answer

1.Here each stripped coupan has $ 35 Face value(FV), Price= -$26.91(PV), N= 10.5*2= 21, CPT I/Y

I/Y= 1.259% therefore YTM= 1.259*2= 2.519 % , Hence the correct option is (C).

2.Since stock price is expected to go up , it means we are bullish , so either we should buy shares, buy call or sell put.

Hence the correct option is(b). I AND II

3.Return on investment is given by: (1301.21-1277.60)/1277.60*100= 1.848%=1.9% approx.

Hence the correct option is (c) 1.9%

5. LIBOR ( LONDON INTER BANK OFFER RATE) is the rate that the worlds' leading banks charge from each other for short term loans. Hence the correct answer is (d). LIBOR RATE

4.BDY = (F-P)/F*100*360/N

1.67= (F-100)/F*100*360/15

F= 100.0696

BEY= (F-P)/P*100*365/N

= (100.0696-100)/100*365/15= 1.69%

Hence the correct option is(c).

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.