Question 1 [REPO and Reverse Repo] a. Explain features of REPO and Reverse REPO as money market instruments. b. A dealer repos $ 30 million par of Treasury bond to a municipality for 48 days. The market value of collateral is $ 30,980,000.80. The municipality takes a 2% hair cut of the market value at a repo rate 2.25%. Work out $ return ( 360 day basis) and annualized return ( 365 days basis) on REPO transaction to Municipality. Question 2 a. Explain features of US T-Bills. b. Suppose you could buy a 91-day T-bill at an asked price of $98.85 per $100 face value and you could sell to the dealer at a bid price of $98.65 per $100 face value. What are the quotation conventions on this bill and how is the yield calculated? What is the best measure of the yield on a T-bill? Question 3 [ Convertible debentures] a. Explain features of convertible debentures. AB, Inc. issued $ 100,000,000 convertibles debentures @ $ 1000 per convertible. Coupon rate 3.5%, maturity 10 years. Current stock price of the company is $ 50. Conversion price is set at $ 60. Dividend $ 0.6 Work out (a) conversion ratio, (b) Conversion value per convertible, (c) Conversion premium and Stock and (d) Break even years ( years by which conversion premium will be recovered by thee investor). Are the convertibles attractive to investors from the angle of BEP (years)? Hints : see presentation Debentures and Bonds, slides 7-11. Question 4 [ Valuation of bonds] a. Briefly explain price-yield relationship of a bond. b. AB) Inc. issued 100 million bonds of $ 100 each - Coupon 3.5%, Maturity 10 years. Current yield of similar bonds issued by similarly rated borrowers is 3.25%. Find out value of the bond. Question 5 [ Stock return analysis] Work out stock return of Microsoft Inc. over 2015-2019. You may apply XIRR function for this purpose. Hints: See slides 16-29, Presentation : Sources of finance. You may collect relevant information regarding share price and dividend from web sources