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Question 1 (10 Marks) Table 1 Yield (p.a.) on Yield (p.a.) on Instrument Coupon (p.a.) Yield (p.a.) on 15/12/2004 15/06/2004 15/09/2004 CP3M 0.00% 5.52% 5.78%

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Question 1 (10 Marks) Table 1 Yield (p.a.) on Yield (p.a.) on Instrument Coupon (p.a.) Yield (p.a.) on 15/12/2004 15/06/2004 15/09/2004 CP3M 0.00% 5.52% 5.78% 5.57% DB05 5.70% 5.55% 5.89% 5.57% DB07 5.75% 5.75% 5.99% 5.79% DB09 5.79% 5.79% 6.02% 5.83% DB14 5.87% 6.10% 6.13% 5.90% Table 1 shows the coupon rates of the instruments available in the game as well as their annual yields on different dates. Coupons for all the bonds are paid semi- annually, in March and September. All the bonds have a face value of $1mil, respectively, and they mature in the month of March (e.g. DB09 matures in March 2009). Required: a) What is the annualized cost of funds for CP3M for the quarter which ends in September 2004? No calculation is required. [2 marks] b) What is the annualized cost of funds for DB07 for the quarter which ends in September 2004? [4 marks] c) What is the annualized cost of funds for DB07 for the quarter which ends in December 2004? [4 marks]

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