4 questions in totalI need FULL DETAILS and EXPLANATIONS OF WORKINGS

(a) Calculate the 1-month, 3-month and 6-month forward premiums from the following outright quotes for EUR (in USD): 11265-85 11-20 14-29 30-45 (1 0 marks) (b) Suppose the 3-month USD Libor is 0.27600 % and the 3-month EUR Libor is 0.02%. Is there an arbitrage opportunity given the spot and 3-month forward quotes from the table in (a)? Explain. (10 marks) Question 4 Mr Peters is the CEO of Venus Technologies which has carved out a niche for itself in the space of designer accessories for Apple products. Mr Peters is planning to expand the company's operations out of Singapore into China. If it succeeds, Mr Peters expects a profit of 5120 million, otherwise Mr Peters could lose $150 million. Furthermore, he estimates that there is a 75% chance that the factory will not succeed. One way to ameliorate the high risk is to build a smaller factory in China and only to proceed with the large factory if it succeeds. The small factory will cost $25 million to build and Mr Peters estimates that there is a 55% chance of success for it. If the small factory succeeds, he estimates that there is a 90% chance that the large factory will also succeed if it is built. If it fails, there is a 70% chance that the large factory will also fail if it is built. Analyse the decision making situation as described above by using decision tree and answer the following questions: (a) Calculate the expected monetary value of building the large factory. (15 marks) (b) Should Mr Peters build the small trial factory if the cost of the trial factory is increased to $30 million? Explain your answer. (5 marks) END OF ASSIGNMENTQuestion 1 A 15-year bond with a face value of $lO0,000 pays coupons semi-annually at 7% pa. and has a maturity value of $lO0,000. Andy bought the bond on its issuance date 3 Mar 2015 at a yield of 6% Analyse the concept of the yield-to-maturity and its relationship with bond pricing by answering the following questions: (a) Find the price of the bond. (10 marks) (b) If Andy sold the bond on 3 Sep 2019 at the yield of 5% to Catherine, how much would he receive? Explain. (10 marks) Question 2 An investigation into the portfolio of the star bond fund manager Mr Templeton reveals that he holds 3 corporate bonds which are described as follows: Corporate Coupon Rate Years to Number of Bond Maturi Bonds -3- Each of these bonds has a maturity value of $1000 and pays semi-annual coupons. For the purpose of valuation and risk management, Mr Templeton used a series of sovereign bonds across a range of maturities to give him an idea of the term structure. Information concerning these bonds is shown here: Yield 1.20% 1.71% Couon RateQuestion 1 A 15-year bond with a face value of $lO0,000 pays coupons semi-annually at 7% pa. and has a maturity value of $lO0,000. Andy bought the bond on its issuance date 3 Mar 2015 at a yield of 6% Analyse the concept of the yield-to-maturity and its relationship with bond pricing by answering the following questions: (a) Find the price of the bond. (10 marks) (b) If Andy sold the bond on 3 Sep 2019 at the yield of 5% to Catherine, how much would he receive? Explain. (10 marks) Question 2 An investigation into the portfolio of the star bond fund manager Mr Templeton reveals that he holds 3 corporate bonds which are described as follows: Corporate Coupon Rate Years to Number of Bond Maturi Bonds -3- Each of these bonds has a maturity value of $1000 and pays semi-annual coupons. For the purpose of valuation and risk management, Mr Templeton used a series of sovereign bonds across a range of maturities to give him an idea of the term structure. Information concerning these bonds is shown here: Yield 1.20% 1.71% Couon RateThe instruments with maturities larger than 1 year are bonds issued at the same time at par, share the same face value of $1000 and pay semi-annual coupons. The instruments with maturities 1 year or less are zero-coupon bonds with yields as shown above. (a) Calculate the zero coupon bond yields with the data shown in the second table above. - - - - - - (20 marks) (b) Calculate the current value of Mr Templeton's portfolio by using the zero coupon yield curve calculated in (a). (5 marks) (c) After certain intraday market move, the market prices of the bonds that Mr Templeton holds are like below. Calculate the yield-to-maturity (YTM) and duration of each individual bond in the portfolio as well as of the portfolio. Explain what the significance of the duration is. Corporate Coupon Years to Number . of Price Bond Rate Maturlty Bonds '- (10 marks) (d) Suppose the interest rate environment sees a general decrease of interest rates by 1%. Calculate the corresponding value of the bond portfolio by using the duration. (5 marks) Question 3 This question requires you to analyse how exchange rates are quoted and the interest rate parity theorem.(a) Calculate the 1-month, 3-month and 6-month forward premiums from the following outright quotes for EUR (in USD): 11265-85 11-20 14-29 30-45 (1 0 marks) (b) Suppose the 3-month USD Libor is 0.27600 % and the 3-month EUR Libor is 0.02%. Is there an arbitrage opportunity given the spot and 3-month forward quotes from the table in (a)? Explain. (10 marks) Question 4 Mr Peters is the CEO of Venus Technologies which has carved out a niche for itself in the space of designer accessories for Apple products. Mr Peters is planning to expand the company's operations out of Singapore into China. If it succeeds, Mr Peters expects a profit of 5120 million, otherwise Mr Peters could lose $150 million. Furthermore, he estimates that there is a 75% chance that the factory will not succeed. One way to ameliorate the high risk is to build a smaller factory in China and only to proceed with the large factory if it succeeds. The small factory will cost $25 million to build and Mr Peters estimates that there is a 55% chance of success for it. If the small factory succeeds, he estimates that there is a 90% chance that the large factory will also succeed if it is built. If it fails, there is a 70% chance that the large factory will also fail if it is built. Analyse the decision making situation as described above by using decision tree and answer the following questions: (a) Calculate the expected monetary value of building the large factory. (15 marks) (b) Should Mr Peters build the small trial factory if the cost of the trial factory is increased to $30 million? Explain your answer. (5 marks) END OF ASSIGNMENTQuestion 1 A 15-year bond with a face value of $lO0,000 pays coupons semi-annually at 7% pa. and has a maturity value of $lO0,000. Andy bought the bond on its issuance date 3 Mar 2015 at a yield of 6% Analyse the concept of the yield-to-maturity and its relationship with bond pricing by answering the following questions: (a) Find the price of the bond. (10 marks) (b) If Andy sold the bond on 3 Sep 2019 at the yield of 5% to Catherine, how much would he receive? Explain. (10 marks) Question 2 An investigation into the portfolio of the star bond fund manager Mr Templeton reveals that he holds 3 corporate bonds which are described as follows: Corporate Coupon Rate Years to Number of Bond Maturi Bonds -3- Each of these bonds has a maturity value of $1000 and pays semi-annual coupons. For the purpose of valuation and risk management, Mr Templeton used a series of sovereign bonds across a range of maturities to give him an idea of the term structure. Information concerning these bonds is shown here: Yield 1.20% 1.71% Couon RateThe instruments with maturities larger than 1 year are bonds issued at the same time at par, share the same face value of $1000 and pay semi-annual coupons. The instruments with maturities 1 year or less are zero-coupon bonds with yields as shown above. (a) Calculate the zero coupon bond yields with the data shown in the second table above. - - - - - - (20 marks) (b) Calculate the current value of Mr Templeton's portfolio by using the zero coupon yield curve calculated in (a). (5 marks) (c) After certain intraday market move, the market prices of the bonds that Mr Templeton holds are like below. Calculate the yield-to-maturity (YTM) and duration of each individual bond in the portfolio as well as of the portfolio. Explain what the significance of the duration is. Corporate Coupon Years to Number . of Price Bond Rate Maturlty Bonds '- (10 marks) (d) Suppose the interest rate environment sees a general decrease of interest rates by 1%. Calculate the corresponding value of the bond portfolio by using the duration. (5 marks) Question 3 This question requires you to analyse how exchange rates are quoted and the interest rate parity theorem.(a) Calculate the 1-month, 3-month and 6-month forward premiums from the following outright quotes for EUR (in USD): 11265-85 11-20 14-29 30-45 (1 0 marks) (b) Suppose the 3-month USD Libor is 0.27600 % and the 3-month EUR Libor is 0.02%. Is there an arbitrage opportunity given the spot and 3-month forward quotes from the table in (a)? Explain. (10 marks) Question 4 Mr Peters is the CEO of Venus Technologies which has carved out a niche for itself in the space of designer accessories for Apple products. Mr Peters is planning to expand the company's operations out of Singapore into China. If it succeeds, Mr Peters expects a profit of 5120 million, otherwise Mr Peters could lose $150 million. Furthermore, he estimates that there is a 75% chance that the factory will not succeed. One way to ameliorate the high risk is to build a smaller factory in China and only to proceed with the large factory if it succeeds. The small factory will cost $25 million to build and Mr Peters estimates that there is a 55% chance of success for it. If the small factory succeeds, he estimates that there is a 90% chance that the large factory will also succeed if it is built. If it fails, there is a 70% chance that the large factory will also fail if it is built. Analyse the decision making situation as described above by using decision tree and answer the following questions: (a) Calculate the expected monetary value of building the large factory. (15 marks) (b) Should Mr Peters build the small trial factory if the cost of the trial factory is increased to $30 million? Explain your answer. (5 marks) END OF ASSIGNMENT