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Question 1: (5 Marks) City bank has six-year zero coupon bonds with a total face value of $20 million. The current market yield on the
Question 1: (5 Marks) City bank has six-year zero coupon bonds with a total face value of $20 million. The current market yield on the bonds is 10 percent. 1. What is the modified duration of these bonds? A. 5.45 years. B. 6.00 years. C. 6.60 years. D. 10.0 years. E. 10.9 years. 2. What is the price volatility if the maximum potential adverse move in yields is estimated at 20 basis points? A. 1.32 percent. B. 2.00 percent. C. 2.18 percent. D. 1.09 percent. E. 1.20 percent. 3. What is the daily earnings at risk (DEAR) of this bond portfolio? A. $246,111. B. $218,180. C. $135,474. D. $149,021. E. $225,789. 4. What is the 10-day VAR assuming the daily returns are independently distributed? A. $714,009.31 B. $778,270.16 C. $389,135.09 D. $428,405.58 E. $471,246.16 5. What is the total DEAR of Sumitomo's trading portfolio if the correlations among assets are ignored? A. $100,000. B. $291,548. C. $350,000. D. $380,789, E. $400,000
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