debt exam
assume that you take out a 15-year mortgage at a 10% interest rate and $100 principal. the annual mortgage payment is $8.99. what is the interest rate? 4% 4.25% 4.5% 4.75% none of the above
4%
an individual owns a 21 year maturity bond with an annual coupon of 10%, A face value of 100,000, and a price of 95,000. to protect against rising interest rates, the individual shorts one CBT treasury bond futures contract with a delivery date 2 years hence and a futures price of 92-16. in the course of the next year, interest rates change. the bond price drops to 88K and the futures price drops to 86-16. what is the next change in the position? -1000 -7000 +6000 -3000 none of the above
-1000
a 15-year bond is deliverable into the U.S Treasury Bond Futures Contract. the coupon rate of this bond is 4%. what is the adjustment factor this bond? .75 .8040 .9430 1.0535 none of the above
.8040
suppose that the combined theory explains the term structure of interest rates. the current one-period spot interest rate of 4.5%. the market expects rates next period to increase by x%. there is a liquidity premium of 1.5%. the two period spot interest rate is current 5.74%. what is the expected increase in the spot interest rate over the next period? .99 .015 1.0450 1.600 none
.99
you buy gold in the spot market at $1400 per ounce. you decide to hedge the gold position with cross hedge in platinum futures. for every dollar that gold advances (or declines), platinum futures are likely to change by $.85. you decide to short platinum futures to try to crease a perfect hedges for your gold position. what is the optimal hedge ratio? .85 .9732 1.0341 1.1765 none of the above
1.1765
assume that you take out a 15-year mortgage at a 10% interest rate and $100 principal. at the end of what year will 50% of the mortgage be repaid? 9 years 10 years 11 years 12 years none of the above
10 years
assume that you take out a 15-year mortgage at a 10% interest rate and $100 principal. after one year, the interest rate on new loans is 7%. if you refinance, there are refinancing costs of 6%. compute the immediate gain from refinancing. 12.32 12.52 12.77 13.04 none of the above
12.32
for a standard fixed-rate mortgage, compute the annual mortgage payment for a 15-year annual mortgage loan with principal of $100 and interest rate of 10 percent. 12.75 13.15 13.45 13.87 none of the above
13.15
the open interest includes longs; bob - 15 contracts lois - 5 contracts shorts; bill - 10 contracts helen - 10 contracts determine the new open interest if bill goes long three contracts, harry goes short three contract, lois shorts 2 contracts, and helen goes long 2 contracts 17 18 19 20 none of the above
18
suppose that the US treasury bond futures contract has an ending price on the delivery date $110. there are four deliverable bonds as of the delivery date of the contract. A 15-year bond has a price 125$ and an adjustment factor of 1.10. An 18 year bond has a price of 117$ and an adjustment factor of .95. A 25-year bond has a price of $102 and an adjustment factor of .92. which of these bonds is the cheapest to deliver into the contract? 15 year 18 year 20 year 25 year none of the above
20 year
assume that the price quotation of the CBT treasury bond futures contract changes from 98-17 to 99-12. what is the loss to the short as a result of of marking-to-market for 3 contract with $100,000 par value? 843.75 2200.25 2531.25 2562.50 none of the above
2531.25
suppose you go long in gold futures at $1500 per ounce. your broker requires you to put up 5% of this price as collateral. the net day gold futures settle at $1520. compute the gain as a percent of your equity in the position 1.33% 13.33 26.67 33.33 none of the above
26.67
assume the following information about the futures price for gold: 1:1300 2:1350 3: 1400 if the current spot price of gold is $1260, determine spot interest rate for period 3 assuming perfect markets. 1.11 11.11 12.22 3.57 none of the above
3.57
the current one-year spot interest rate is 3%. the possible values for the one-year spot rate next year are 2% with probability .20, 4% with probability .50, and 6% with probability .30. if the unbiased expectations hypothesis is true, what is the forward interest-rate observed today for time period 2? 4 4.2 4.3 4.8 none of the above
4.2
for a standard fixed rate 30 year mortgage loan with a principal of 100, monthly payments, and stated interest rate of 4%, what is the remaining principal at the end of month 240 46.77 47.15 47.83 48.24 none of the above
47.15
an individual owns a 21 year maturity bond with an annual coupon of 5%, A face value of 100,000, and a price of 95,000. to protect against rising interest rates, the individual shorts one CBT treasury bond futures contract with a delivery date 2 years hence and a futures price of 92-16. in the course of the next year, interest rates drop. the futures price goes to 97-16. at what interst rate on the bond would the hedge just break even? 4.5 4.75 5 5.25 none of the above
5
assume that you take out a 15-year mortgage at a 10% interest rate and $100 principal. what percentage of the principal has been repaid by year 13? 75% 76.23% 77.18% 77.15% NONE OF THE ABOVE
77.18%
assume that the price quotation of the CBT treasury bond futures contract changes from 96-14 to 97-09. what are the losses to the short as a result of marking-to-market for 1 contract with $100,000 par value? 843.75 850 853.25 865
843.75
a bond futures contract with one deliverable bond has a maturity date in 2 years from now have, par value of $100, and annual coupon of $7.25. if the futures delivery date is in one year, determine the spot price if two-period strips per 100 of par if the futures price is 101.98 and if one-period strips have a price of 91.5 per 100 of par value. 86.75 87 87.53 87.90 none of the above
87
assume the combined theory explains the term structure. the one-period spot rate is 5%, the expected spot rate next period is 7% and the liquidity premium is 2%. whats the forward interest rate? 2 5 7 9 none of the above
9%
assume that you take out a 15-year mortgage at a 10% interest rate and $100 principal. compute the amortization in year 13. 9.25 9.41 9.53 9.88 none of the above
9.88
suppose a bond futures contract has one deliverable bond with a maturity date 30 years from now, par value of $100, price at $95, and annual coupon of $8. if the futures delivery date is in 1 year, determine the futures price if R(0,1) = 4% 89.25 90.80 91.45 91.75 none of the above
90.80
a bond futures contract with one deliverable bond has a maturity date in 2 years from now have, par value of $100, and annual coupon of $8. if the futures delivery date is in 1 year, determine the futures price if R(0,1) = 5%, R(0,2)=10% 100 102.86 93.72 98.18 none of the above
93.72
a bond futures contract with one deliverable bond has a maturity date in 3 years from now have, par value of $100, and annual coupon of $8. if the futures delivery date is in 1 year, determine the futures price if R(0,1) = 5%, R(0,2)=7%, and R(0,3)=9% 94.90 96.33 99.08 100.04
94.90
a bond futures contract with one deliverable bond has a maturity date in 3 years from now have, par value of $100, and annual coupon of $6.75. if the futures delivery date is in one year, determine the futures price if the prices of 1-, 2-, 3-period strips per 100 per 94, 86, 79. 94.22 94.38 95.12 95.89 none of the above
95.89
the open interest includes longs; bob - 15 contracts lois - 5 contracts shorts; bill - 10 contracts helen - 10 contracts determine the new open interest if bill goes long three contracts and harry goes short three contracts 17 18 19 20 none of the above
NOA
which of the following is a correct statement? a firm that is designated as in financial distress has a cost of goods sold less than revenues a firm designated as in financial distress must inevitably go into bankrupcy a firm that has fixed charges in excess of op income is often described as in financial distress and has no alternative but to go into bankrupcy bankruptcy courts were designed to alleviate the common pool problem none of the above
bankruptcy courts were designed to alleviate the common pool problem
suppose that we observe the following prices on strips with $100 par values: S1 = 97.09; S2 = $92.46; S3 = $86.38; S4=85.48. What is the shape of the term structure. monotonically rising monotonically declining humped shape all of the above none of the above
humped shape
suppose that a 1 period strip with 100 par value has a price of 91, a 2 period strip with 100 par value has price of 88, and 3 year bond w annual coupon of 8 has a price of 100. suppose an investor decides to buy the three period bond and short 8% of 1 period strip. what is the correct way to describe this position long forward short forward arbitrage risky none of the above
none of the above
suppose that there is a spot market for treasuty strips and a forward market. a one-period strip with 100 par value sells for 95.50 and two peruod strip sells for 92.25 per 100 in the spot market. in the forward market for strips for delivery in one year, strups have quotes of 97 per 100. suppose that an investor buys one two period strip and short .9225 one-period strips in the spot market and short one in the forward market. what is the profit 4.75 4.90 5.10 no arbitrage opprotunity none of the above
none of the above
suppose that we observe the following prices on strips with $100 par values: S1 = 97.09; S2 = 92.46; S3 = 86.38; S4 = $87.21. which term strucuture theories are consistent with these strips prices increasing liquidity premium theory expectations hypothesis combined theory all of the above none of the above
none of the above
which of the following is a correct statement? the default risk of a corporate bond increases at a constant rate as the rating decreases the underwriter fee for corporate bonds increases steadily as bond ratings decline from AAA to B in the typical bankruptcy of large corporations, the final result is typically a liquidation the holder of a secured bond has 100% certainty of receiving full value in the event of default, in contrast to holders of unsecured bonds none of the above
none of the above
you observe the following term structure 1 - .12 2 - .14 3 - .05 4 - .04 increasing liquidity premium theory expectations hypothesis combined theory all of the above none of the above
none of the above
which of the following is a correct statement? the default risk of corporate bond increases at an increasing rate as the rating changes from A to B+ the underwriter fees for corporate bonds increase at a constant rate as bond ratings decline from AAA to A in the typical bankruptcy of large corporations, the final resolution of the bankruptcy takes at least 10 years. the holder of an unsubordinated debenture has a 100% certainty of receiving full value in the event of default none of the above
the default risk of corporate bond increases at an increasing rate as the rating changes from A to B+
whihc of the following is a correct statement? the growth of mortgage-backed securities market allowed some commericial banks to remove mortgages from their balance sheets and then make additional mortgages and earn more fees from mortgage origination initial issuance of mortgage-backed securities requires a Rule144A registration with the SEC in contrast to corporate bonds sold to the public which require a full registration with the SEC dividing mortgage-backed securities into tranches tends to increase the liquidity of the securities all of the above none of the above
the growth of mortgage-backed securities market allowed some commericial banks to remove mortgages from their balance sheets and then make additional mortgages and earn more fees from mortgage origination
bond g is a two period bond with annual coupon of 5.25, par value of 100, and price of 97.50. bond h is a two period bond with annual coupon of 6.50, par value of 100, and price of 101 there is an arbitrage profit from shorting bond g and buying bond h there is an arbitrage opportunity from buying bond g and shorting bond h there is an arbitrage profit from shorting bond g there is no arbitrage profit none of the above
there is an arbitrage opportunity from buying bond g and shorting bond h
a one-period strip has a spot interest rate of 14% and par value of 100. a 2 period strip has a spot interest rate of 4% and a par value of 100. which of the following is correct the prices of these strips are consistent with artibrage free pricing there is an arbitrage opportunity from shorting the one period strip and shorting the two strip there is an arbitrage opportunity from buying the two period strup and shorting the one-period strip there is an arbitrage opportunity from buying the one-period strip and shorting the two period strip none of the above
there is an arbitrage opportunity from buying the one-period strip and shorting the two period strip
a one-period strip has a spot rate of 8% and par value of $100. a two period strip has a spot interest of 3.75% and par value of $100. which of the following statements is correct? the prices of these strips are consistent with arbitrage free pricing there is an arbitrage opportunity from shorting the one period strip and shorting the two period strip there is an arbitrage opportunity from buying the two-period strip and shorting the one-period strip there is an arbitrage opportunity from buying the one-period strip and shorting the two-period strip none of the above
there is an arbitrage opportunity from buying the one-period strip and shorting the two-period strip
assume no marketing-to-market or storage costs. the spot price of gold 1300 and the futures price for delivery in 1 year is 1360. the annual intrest rate is 2.31. which of the following statements is correct? there is an arbitrage opportunity from going long gold futures, short selling gold in spot market, lending the proceeds, covering the short with the long position in the futures market, and closing all positions at the delivery date. there is an arbitrage opportunity from going short gold futures, short selling gold in spot market, lending the proceeds, covering the short with the long position in the futures market, and closing all positions at the delivery date. there is an arbitrage opportunity from going long gold futures, purchasing gold in spot market with borrowed money, covering the short with the long position in the futures market, and closing all positions at the delivery date. there is an arbitrage opportunity from going short gold futures, buying gold in spot market with borrowed funds with interest at the delivery date, and closing all positions at the delivery date. none of the above
there is an arbitrage opportunity from going short gold futures, buying gold in spot market with borrowed funds with interest at the delivery date, and closing all positions at the delivery date.
bond g is a two-period bond with annual coupon of $6.25, par value of $100, and price of $97.50. bond h is a two-period bond with annual coupon $6.75, par value of $100, and price of $98.75. which one of the following is correct there is an arbitrage opportunity shorting bond G and buying bond H there is an arbitrage opprotunity from buying bond G and shorting bond H there is an arbitrage opprotunity from shorting bond G there are no arbitrage opprotunities none of the above
there is an arbitrage opprotunity from buying bond G and shorting bond H
suppose that one-period strips sell at 97.50 and two period strips sell at 94 per 100 of par. a two period bond has an annual coupon of 6, 100 par value, and price of 99.50 whats correct? no arbitrage there is an arbitrage profit from shorting the coupon-bearing bond, buying .06 one period strips and buying 1.06 two period strips there is an arbitrage profit from buying the coupon-bearing bond, shorting .06 one-period strips and buying 1.06 two-period strips there is an arbitrage profit from buying the coupon beaing bond, shoirting .06 one period strips and shorting 1.06 two period strips none of the above
there is an arbitrage profit from buying the coupon beaing bond, shoirting .06 one period strips and shorting 1.06 two period strips
bond g is a two period bond with annual coupon of 5.25, par value of 100, and price of 101. bond h is a two period bond with annual coupon of 5.50, par value of 100, and price of 101 there is an arbitrage profit from shorting bond g and buying bond h there is an arbitrage opportunity from buying bond g and shorting bond h there is an arbitrage profit from shorting bond g there is no arbitrage profit none of the above
there is an arbitrage profit from shorting bond g and buying bond h
suppose that a 1 period strip sells at 97.50 and two period strips sell at 94 per 100 of par. a two period bond has annual coupon of 5, 100 par value, and price of 104, whats correct there is no arbitrage there is an arbitrage profit from shorting the coupon bearing bond, buying .05 one period strips and buying 1.05 two period strips there is an arbitrage profit from buying the coupon bearing bond, shorting .05 one period strips and buying 1.05 two period strips there is an arbitrage profit from buying the coupon bearing bond, shorting .05 one period strips and shorting 1.05 two period strips none of the above
there is an arbitrage profit from shorting the coupon bearing bond, buying .05 one period strips and buying 1.05 two period strips
suppose that one-period strips sell at $95 and two period strips sell at $91 per $100 of par. a two-period bond has an annual coupon $8, $100 par value, and price $106. which of the following statements is correct? there are no arbitrage opprotunities there is an arbitrage profit from shorting the coupon-bearing bond, buying .08 one-period strips and buying 1.08 two-period strips there is an arbitrage profit from buying the coupon bearing bond, shorting .08 one period strips and buying 1.08 two-period strips there is an arbitrage profit from buying coupon-bearing bond, shorting .08 one-period strips and shorting 1.08 two-period strips
there is an arbitrage profit from shorting the coupon-bearing bond, buying .08 one-period strips and buying 1.08 two-period strips
bond g is a two-period bond with annual coupon $4.25, par value of $100, and price of $101. bond h is a two-period with annual coupon of $4.50, par value of $100, and price of $101. which of the following statements is correct there is arbitrage opprotunity from shorting bond G and buying bond H there is an arbitrage opportunity from buying bond G and shorting bond H there is an arbitrage opportunity from shorting bond g there is no arbitrage opportunities none of the above
there is arbitrage opprotunity from shorting bond G and buying bond H
