Problem 2. (10 points) Throughout the remainder of this exam, you should use the following information on the current (0) yield curve That is unless stated otherwise, use the information below for calculating any values or yields needed in any of the subsequent Problems in this exam Today (5/27/223, the prices on ero coupon US Treasury STRIPS are as follows Maturity In years Price (per $100 in face value) $8.50 YTM 1 [100% 45-50-1 01528 2 95.20 100/05-20 102490 3 4 (100/46)^(1/2-1-0-02911 87.18 (100/871-463501 82.19 (100/82.18 YUS)-1 0400 Question Calculate the yields to maturity for each of these seres? Fill in the banks above (20 poi 2 points each) Show your work below Problem 5 (32 points) Again, use the data on the current yield curve from Problem 2. Steve Inc. has someone (Steve) in it's treasury department who thinks he can exploit some m pricings in the bond market. On behalf of Steve Inc., Steve issues one thousand (1000) 2-year two-percent annual pay coupon bonds, each with a face value of $1000; each of the 1000 bod pays its 2% coupons once a year at the end of the year). The market perceives that Steve Inc. has no risk of default Steve uses the proceeds from this sale to invest in 3-year zeros, as priced in Problem above Questions: The sale of the bonds are Steve inc abilities. What is the sale price per $1000 in face value that Steve inc gets for these bonds? Show your work (3 points) b. How much money does Steve inc. get from selling 1000 of these bonh? 12 pint What is the duration of these bords? (3 points. Show your work below d. f the yield to maturity on these bonds where to change by 1 percent (ie, (change in ytm)/(1+ytm) (or dr/(1+r) is01), what is the percentage change in the value of these bonds. Use the approximation based on the bond's duration measure (4 points) e. If Steve buys as many 3-year zeros as he can with the proceeds from the sale of the 2% coupon, 2-year bonds, how many 3-year zeros (per $100 in face value) will Steve inc get? These bonds are Steve Inc's assets (3 points) What is the duration of the year po if the yield to maturity on these bonds where to change by 1 percent 0. (change ytmi/1-ytm)-de/1er) 01), what is the percentage change in the value of these bonds. Use the approximation based on the bond's duration measure (4 points) right after Steve sells the 2%, 2-year bonds and buys the 3-year the yield cune shifts up, what happens to the value of Steve's position in these boods? No need to show specific numbers just indicate the direction and relative magnitudes based on prior answers of any changes in value. (8 points-2 points each What happens to the value of the bonds Steve incut Does their value go down or What happens to the sale of the year charged for each which r The chance in value for the 2-y 2% cop first one and exp Make money Cicle one and explain why below ange atay the same Problem 2. (10 points) Throughout the remainder of this exam, you should use the following information on the current (0) yield curve That is unless stated otherwise, use the information below for calculating any values or yields needed in any of the subsequent Problems in this exam Today (5/27/223, the prices on ero coupon US Treasury STRIPS are as follows Maturity In years Price (per $100 in face value) $8.50 YTM 1 [100% 45-50-1 01528 2 95.20 100/05-20 102490 3 4 (100/46)^(1/2-1-0-02911 87.18 (100/871-463501 82.19 (100/82.18 YUS)-1 0400 Question Calculate the yields to maturity for each of these seres? Fill in the banks above (20 poi 2 points each) Show your work below Problem 5 (32 points) Again, use the data on the current yield curve from Problem 2. Steve Inc. has someone (Steve) in it's treasury department who thinks he can exploit some m pricings in the bond market. On behalf of Steve Inc., Steve issues one thousand (1000) 2-year two-percent annual pay coupon bonds, each with a face value of $1000; each of the 1000 bod pays its 2% coupons once a year at the end of the year). The market perceives that Steve Inc. has no risk of default Steve uses the proceeds from this sale to invest in 3-year zeros, as priced in Problem above Questions: The sale of the bonds are Steve inc abilities. What is the sale price per $1000 in face value that Steve inc gets for these bonds? Show your work (3 points) b. How much money does Steve inc. get from selling 1000 of these bonh? 12 pint What is the duration of these bords? (3 points. Show your work below d. f the yield to maturity on these bonds where to change by 1 percent (ie, (change in ytm)/(1+ytm) (or dr/(1+r) is01), what is the percentage change in the value of these bonds. Use the approximation based on the bond's duration measure (4 points) e. If Steve buys as many 3-year zeros as he can with the proceeds from the sale of the 2% coupon, 2-year bonds, how many 3-year zeros (per $100 in face value) will Steve inc get? These bonds are Steve Inc's assets (3 points) What is the duration of the year po if the yield to maturity on these bonds where to change by 1 percent 0. (change ytmi/1-ytm)-de/1er) 01), what is the percentage change in the value of these bonds. Use the approximation based on the bond's duration measure (4 points) right after Steve sells the 2%, 2-year bonds and buys the 3-year the yield cune shifts up, what happens to the value of Steve's position in these boods? No need to show specific numbers just indicate the direction and relative magnitudes based on prior answers of any changes in value. (8 points-2 points each What happens to the value of the bonds Steve incut Does their value go down or What happens to the sale of the year charged for each which r The chance in value for the 2-y 2% cop first one and exp Make money Cicle one and explain why below ange atay the same
