Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. Compute the price of a zero-coupon bond (ZCB) that matures at time t = 10 and that has face value 100. Submission Guideline: Give

1. Compute the price of a zero-coupon bond (ZCB) that matures at time t = 10 and that has face value 100.

Submission Guideline: Give your answer rounded to 2 decimal places. For example, if you compute the answer to be 73.2367%, submit 73.24.

2. Compute the price of a forward contract on the same ZCB of the previous question where the forward contract matures at time t = 4.

Submission Guideline: Give your answer rounded to 2 decimal places. For example, if you compute the answer to be 73.2367%, submit 73.24.

3. Compute the initial price of a futures contract on the same ZCB of the previous two questions. The futures contract has an expiration of t = 4.

Submission Guideline: Give your answer rounded to 2 decimal places. For example, if you compute the answer to be 73.2367%, submit 73.24.

4. Compute the price of an American call option on the same ZCB of the previous three questions. The option has expiration t = 6 and strike =80.

Submission Guideline: Give your answer rounded to 2 decimal places. For example, if you compute the answer to be 73.2367%, submit 73.24.

5. Compute the initial value of a forward-starting swap that begins at t=1, with maturity t = 10 and a fixed rate of 4.5%. (The first payment then takes place at t = 2 and the final payment takes place at t= 11 as we are assuming, as usual, that payments take place in arrears.) You should assume a swap notional of 1 million and assume that you receive floating and pay fixed.)

Submission Guideline: Give your answer rounded to the nearest integer. For example, if you compute the answer to be -220,432.23, submit -220432.

6. Compute the initial price of a swaption that matures at time t = 5 and has a strike of 0. The underlying swap is the same swap as described in the previous question with a notional of 1 million. To be clear, you should assume that if the swaption is exercised at t = 5 then the owner of the swaption will receive all cash-flows from the underlying swap from times t = 6 to t = 11 inclusive. (The swaption strike of 0 should also not be confused with the fixed rate of 4.5% on the underlying swap.)

Submission Guideline: Give your answer rounded to the nearest integer. For example, if you compute the answer to be -220,432.23, submit -220432.

2. Compute the price of a forward contract on the same ZCB of the previous question where the forward contract matures at time t = 4.

Submission Guideline: Give your answer rounded to 2 decimal places. For example, if you compute the answer to be 73.2367%, submit 73.24

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Analysis for Financial Management

Authors: Robert Higgins

11th edition

77861787, 978-0077861780

More Books

Students also viewed these Finance questions

Question

23. What is vendor-managed inventory?

Answered: 1 week ago

Question

19. What information is typically stored in a bar code or RFID tag?

Answered: 1 week ago

Question

18. When are some good times to count inventory?

Answered: 1 week ago