Hi,

This is a financial markets and institutions. I need this done by tomorrow 9:00am.

Everything needs to be in complete sentence and all the work shown for calculations.

Thank you.

The University of Western Ontario DAN Management and Organizational Studies MOS 3313b: Financial Markets and Institutions Assignment 3 - Prof. Brou - Sections 001 and 003 Due Date: 12 noon (mid-day), March 2, 2017 Instructions: The following questions are based on the lecture material and the related readings in chapters 5-6. Answer all questions to the best of your ability and as concisely as possible. The points allocated to a question reflect the relative importance of the question and not how many ideas you need to express. You must submit a hard copy of this assignment before 12pm on the due date. You can either drop it off directly to my office (SSC 4425 - just slide it under the door if I'm not in) or submit it to me during class. Late assignments will not be accepted. Email submissions will not be accepted. Use the tools and terminology learned in this course wherever possible. 1. (3 points) One-month treasury bills with a $10,000 face value are currently selling for $9,992.20; 15-day commercial paper has a discount yield of 1.10%, 3-month bankers' acceptances are yielding 1.20%; and 5-year treasuries yield 1.40%. You have been informed by your boss that the company you work for has $1M in excess cash, which will be needed for other uses in 30 days. Given the information above, explain what advice you would give your boss. 2. (3 points) An investor purchases commercial paper which matures in 160 days and has a face value of $1 million. The price at purchase is $991,740.03. Thirty days later, the investor sells the commercial paper for $994,685.93. Calculate the discount yield at the time of purchase, the discount yield at the time of sale, and the investor's annualized realized return. Briefly describe the relationship between the three rates. 3. (3 points) Company X would like to raise $10M to invest in capital expenditures. The company plans to issue five year bonds with a face value of $1000 and coupon rate of 6.5% with annual payments. The following table summarizes the yield to maturity for five-year coupon corporate bonds of various ratings. Rating AAA AA A BBB 6.20% 6.30% 6.50% 6.90% YTM (a) Management thinks the bonds will be rated AA. If they are correct, and assuming no transaction costs, how many bonds will they have to issue in order to raise the required capital? (Since you cannot issue a fraction of a bond, round up to the nearest whole number.) What would be the total face value of this debt? (b) Suppose that the actual issue price in the market is $983.56. What does this tell you about how the market views Company E's debt? 4. (6 points) Find and read the article: \"Government Bonds: Who's Scary Now?\" The Economist, 22 October 2016. Provide a brief (one-page maximum) discussion of the implications of the changing role of bond markets. Use the tools and terminology learned in this course wherever possible