$1.$ List the following from highest value to lowest value when a bond sells at a premium:

Coupon Rate, Yield to Maturity, Current Yield $(2$ marks$)$

$2.$ Suppose you own $$100$ face value of a $12$ year bond with a yield to maturity of $5\%$ and which is currently

priced at par. If the bond$$s yield to maturity rises to $6\%$ or falls to $4\%$ the bond$$s value will change. State

which would be a smaller dollar amount, your loss or your gain? Also, create an example to prove your answer.

$(2$ marks$)$

$3.$ You manage a bond portfolio and feel strongly that interest rates will soon go down. By

holding which of the following kinds of bond will you likely make the most when rates fall? $(2$

marks$)$

a$)$ long term, low coupon

b$)$ long term, high coupon

c$)$ short term, low coupon

d$)$ short term, high coupon

$4.$ Calculate the price of these bonds to $2$ decimal places. $(4$ marks $-2$ marks each$)$

a$)14-$year Quebec $5\mathrm{.}00\%$ sa$..$ $$100$ face value. Investors required a YTM of $6\mathrm{.}5\%$

compounded semi$-$annually.

Mode$=$

N$=$

P$/$Y $=$

C$/$Y$=$

I$/$Y$=$

PMT$=$

FV$=$

PV $=$

b$)4-$year Ontario zero coupon bond. $.$ $$100$ face value. Investors required a YTM of

$8\mathrm{.}7\%$ compounded annually.

Mode$=$

N$=$

P$/$Y $=$

C$/$Y$=$

I$/$Y$=$

PMT$=$

FV$=$

PV $=$

$5.$ Calculate the yield to maturity for the following bonds to $2$ decimal places. $(4$ marks $-2$

marks each$)$

a$)9-$year Canada $7\mathrm{.}4\%$ semi$-$annual, $.$ $$100$ face value. Priced at $101\mathrm{.}99$

Mode$=$

N$=$

P$/$Y $=$

C$/$Y$=$

PMT$=$

FV$=$

PV $=$

I$/$Y$=$

b$)22-$year Canadian Tire $5\mathrm{.}4\%$ annual, $.$ $$100$ face value. Priced at $96\mathrm{.}75$

Mode$=$

N$=$

P$/$Y $=$

C$/$Y$=$

PMT$=$

FV$=$

PV $=$

I$/$Y$=$

$6.$ Calculate the annualized yield on a $212$ day T$-$bill purchased at $92\mathrm{.}3.$ Show your work. $(2$

marks$)$

Complete the sentences by deleting the inappropriate terms. $(5$ marks $-1$ mark

each$)$

$1.$ If interest rates are expected to fall, investors should buy $[$High $/$ Low$]$ coupon, $[$Long $/$

Short$]$ term bonds because they have $[$High $/$ Low$]$ price sensitivity to rate changes.

$2.$ If you invest in $180$ day money market securities you$$d expect to get the safest

investment from $[$ T$-$Bills, Commercial Paper, BAs$].$

$3.$ For a money market security purchased at a discount its $[$Yield$,$ Coupon rate$]$ will be

higher