Problem (32 pnt): Again, use the date on the curent yield curve from Problem 2 Steve Inc. has someone (Steve) in a treasury department who thinks he can exploit some mis pricings in the bond market. On behalf of Steve inc, Steve issues one thousand (2000) 2-year te percent au pay coupon bonds, wach with a face value of $1000, each of the 1000 bod pays 2% copos once a year (at the end of the year). The market perceives that Steve inc As nork of default. Mes the proceeds from this sale to invest in 3-year zeros, as priced in Problem 2 above. Question The sale of the bonds are Steve Inc. Slabilities. What is the sale price per $1000 in face value that Steve inc. gets for the bonds? Show your work. (1 points! 1000/2500 2013 I Personally thing the practice b. How much money does Steve Inc. get from selling 1000 of these bonds? points) exam was nothing Jike the test. 1020 What is the duration of these bonds? ( points) Show your work below. 20 Juda ude the yield to matury on these bonds where to change by 1 percent, change in ytmy011, what is the percentage change in the value of these bonds. Use the approximation based on the bond's duration measure (4 points) 21% if Steve buys as many 3-year zeros as he can with the proceeds frove the sale of the 2% coupon, 2-year bonds, how many 3-year zeros (per $100 in faceva) will Stevec. get? These bonds are Steve inc's assets (3 points) 02x3 +100=10006 -2 What is the duration of the 3-year pot N/A the vieto maturity on these bonds where to change by 1 percent, change in v-11-01) what e percentage change in the value of these honds Use the primation based on the tones duration mesure point 3 Z right after Steve sells the 22-year bonds and buys the 3-year as the vield curve ats up what happens to the value of Steve's position in these bond? No need to show specific numbers jut indicate the direction and relative magnitudes (perhaps based on prior newers) of any changes in value. 8 points-2 pic Specifically go down Whatapps to the value of the bond Steyn issued: Does their valu Com not change de of below) Not Sure What happens to the value of the 3-year revos Steve Inc bought: Does their value GO go down or not change (circle one and explain below) Not Sure What is true about apude of the changedrew, which mapstade is ger The chance in value for the 2-year, 2% cospon bonds Thange the 3-yeat beres circle one and explain why be Not Sure then the yield on, did iteve make money, se more or stay the same? m Ce one and explain why Not sure Problem 2. (10 poin) Throughout the remainder of the exam, you should use the following information on the current vild carve. That is, unless stated otherwise, use the information below for calling any values or yields needed in any of the subsequent Problems in this exam Today 22 the prices on zero-coupon US Treasury STRIPS are as follows: Melenty Price Effective Anal YTM In years per $100 in faceva) 1 98.50 [100% 45-50-101528 2 95.20 100/05-2002490 3 $1.75 4 (100/41 (17--0-02411 37.34 (100/671-16.3.501 82.39 (100/821291/5)-1 0.400. Question Calculate the yields to maturity for each of these eros? Fin the banks above. (10 points, 2 points each Show your work below Problem (32 pnt): Again, use the date on the curent yield curve from Problem 2 Steve Inc. has someone (Steve) in a treasury department who thinks he can exploit some mis pricings in the bond market. On behalf of Steve inc, Steve issues one thousand (2000) 2-year te percent au pay coupon bonds, wach with a face value of $1000, each of the 1000 bod pays 2% copos once a year (at the end of the year). The market perceives that Steve inc As nork of default. Mes the proceeds from this sale to invest in 3-year zeros, as priced in Problem 2 above. Question The sale of the bonds are Steve Inc. Slabilities. What is the sale price per $1000 in face value that Steve inc. gets for the bonds? Show your work. (1 points! 1000/2500 2013 I Personally thing the practice b. How much money does Steve Inc. get from selling 1000 of these bonds? points) exam was nothing Jike the test. 1020 What is the duration of these bonds? ( points) Show your work below. 20 Juda ude the yield to matury on these bonds where to change by 1 percent, change in ytmy011, what is the percentage change in the value of these bonds. Use the approximation based on the bond's duration measure (4 points) 21% if Steve buys as many 3-year zeros as he can with the proceeds frove the sale of the 2% coupon, 2-year bonds, how many 3-year zeros (per $100 in faceva) will Stevec. get? These bonds are Steve inc's assets (3 points) 02x3 +100=10006 -2 What is the duration of the 3-year pot N/A the vieto maturity on these bonds where to change by 1 percent, change in v-11-01) what e percentage change in the value of these honds Use the primation based on the tones duration mesure point 3 Z right after Steve sells the 22-year bonds and buys the 3-year as the vield curve ats up what happens to the value of Steve's position in these bond? No need to show specific numbers jut indicate the direction and relative magnitudes (perhaps based on prior newers) of any changes in value. 8 points-2 pic Specifically go down Whatapps to the value of the bond Steyn issued: Does their valu Com not change de of below) Not Sure What happens to the value of the 3-year revos Steve Inc bought: Does their value GO go down or not change (circle one and explain below) Not Sure What is true about apude of the changedrew, which mapstade is ger The chance in value for the 2-year, 2% cospon bonds Thange the 3-yeat beres circle one and explain why be Not Sure then the yield on, did iteve make money, se more or stay the same? m Ce one and explain why Not sure Problem 2. (10 poin) Throughout the remainder of the exam, you should use the following information on the current vild carve. That is, unless stated otherwise, use the information below for calling any values or yields needed in any of the subsequent Problems in this exam Today 22 the prices on zero-coupon US Treasury STRIPS are as follows: Melenty Price Effective Anal YTM In years per $100 in faceva) 1 98.50 [100% 45-50-101528 2 95.20 100/05-2002490 3 $1.75 4 (100/41 (17--0-02411 37.34 (100/671-16.3.501 82.39 (100/821291/5)-1 0.400. Question Calculate the yields to maturity for each of these eros? Fin the banks above. (10 points, 2 points each Show your work below