1)Provide a brief description of the security, including a) type of the security, b) maturity date, c) coupon rate and frequency, d) seniority ranking, e) credit rating, f) spread at issue, and g) par value.

2)Calculate the above security's full price, clean price and accrued interest as of the date of the screen (12 Aug 2016) using the yield to maturity as listed on the screen from the point of view of investor. Show calculation

For questions 3-11, assume today is 30 Sep 2016 and make appropriate estimation using this assumption.

3) Current (annualised) US Treasury spot rates are as follows.

6 Months - 0.4% , 1 Year -0.5% , 18 moths - 0.6% , 2 year - 0.70%

Assuming that Z-spread is equal to 56 basis points, calculate the bond's arbitrage free price. Show calculations.

4) If the bond is bought today at the arbitrage-free price and sold on 30 Sep 2017 at $101, what will be realised rate of return on bond, if no reinvestments of coupons is assumed. Show calculations.

5)From the US treasury spot rates above and assuming Z-spread of 56 basis points, calculate appropriate discount rates (implied spot rates) for this bond's cash flows. Show calculations

6)Using bond-specific spot rates you calculated in Question 5, derive six-monthly forward rates, including six- months forward rate 6 month from now- _0.5f_0.5,six-month forward rate 12 months from now - ₁f_0.5, and six-months forward rate 18 months from now - _1.5f_0.5 for the bond. Show calculations

7)Estimate the bond's arbitrage free price using forward rates calculated in question 6 and comment on comparability of spot rate and forward rate pricing. Show calculations.

8) There is another Google Billiton 2.5 year semi-annual 2% coupon paying bond in the market priced at $100.79. Using bond-specific spot rates as calculated in Question 5 (for 0.5 year, 1 year, 1.5 year and 2 years), bootstrap 2.5-year spot rate for the bond.

9)Estimate the original bond's (displayed in Figure 1) Macaulay Duration and Convexity (as of 30 Sep 16). Show calculations.

Hint: for semiannual coupon paying bonds you will be using the semiannual cash flows, yields and periods as inputs for your calculation of the Macaulay Duration and Convexity. You will need to convert the output of your calculations into the annualised (standard) form. To do that you should divide Macaulay Duration and Convexity based on the semiannual periods by 2 and 4 respectively to arrive with the final answer.

10)Estimate the original bond's (displayed in Figure 1) Approximate Modified Duration and Approximate Convexity by applying 10bp interest rate shock to annualised yield to maturity (as of 30 Sep 16). Show calculations

11) Assume the following interest rate tree