portfolio.
• Calculate bank discount yield, holding period yield, effective annual yield, and money
market yield for a U.S. Treasury bill.
• Convert among holding period yields, money market yields, and effective annual yields.
• Calculate bond-equivalent yield.
SUMMARY OVERVIEW
In chapter 2, we...
problems specified.
9-4
Chapter 10 - BondPrices and YieldsCHAPTER TEN BONDPRICES AND YIELDSCHAPTER OVERVIEW
This chapter presents various types of bonds, bond characteristics, bond safety and bond ratings, and pricing and yield calculations. This edition also covers credit default swaps...
bondprices and why this is so important for the absence of arbitrage conditions on which the expectations hypothesis focuses.
122
Chapter 9: The term structure of interest rates
Sample examination questions
Section A Specify whether the following statement is true, false or uncertain...
null hypothesis H0 is rejected and it can be said that there is significant difference between calculated mean and hypothesized mean.
* Bonds
One Sample t-test:
Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (3). In other words...
include extensive references for those who would like to dig deeper into a given concept. The workbooks provide a summary of each chapter’s key points to help organize your thoughts, as well as samplequestions and answers to test yourself on your progress. For the new student, the essential...
, coupon, and market yield (see Chapter 19). Finally, significant problems can arise in correctly pricing the individual bond issues in an index (especially corporate and mortgage bonds) compared to the current and continuous transactions prices available for most stocks used in stock indexes. The...
of underlying T-bond
Financial Risk Manager Handbook, Second Edition
CHAPTER14. HEDGING LINEAR RISK
315
Example 14-1: FRM Exam 2000----Question 78/Market Risk 14-1. What feature of cash and futures prices tends to make hedging possible? a) They always move together in the same...
, vega, and rho for option positions.
Reference: Hull, Options, Futures and Other Derivatives, 7th Edition, Chapter 17
20.
A 5-year corporate bond paying an annual coupon of 8% is sold at a price reflecting a yield-to-maturity of
6% per year. One year passes and the interest rates remain...
, defined as deviations from covered and uncovered interest-rate parity, in shaping the decision to denominate debt in foreign cur-rencies. The investigation incorporates a large sample of foreign bonds in a panel count model of currency choice. The third question asks, what do exchange-rate...
test, we test a sample for randomness of order. A run is defined as “a sequence of identical occurrence preceded and followed by different occurrences or by none at all.” For testing the randomness of share prices, we take a series of stock prices. Starting with the first price, each price changes is...
and/or the candidates’ test scores. For security reasons, the examination and/or individual testquestions are not available for review after taking the examination.
SAMPLETESTQUESTIONS AND REFERENCES
Several samplequestions are presented at the end of this outline. The samplequestions are...
– Quantitative Easing 2.6 – The Effects of Quantitative Easing 2.7 – Conclusion
10 14 19 24 27
Chapter Three
3–
The Model
29 29 34
3.1 – Model and Variables 3.2 – Data
v
3.3 – Correlogram Tests 3.4 – Unit Root Tests 3.5 – Cointegration Tests 3.6 – Model Testing – Equation 3.1.1...
estimates the “bond-equivalent” yield for a T-Bill. Location within INSERT/FUNCTION: FINANCIAL/TBILLEQ Data requirements • settlement date • maturity date
146
Interest
Basis
YieldPriceChapter 7: Discount Cast Flows
•
discount rate
See section 8.1 on page 116 for a...
proxies. Consequently, the proxy-based SML would offer less expected return per unit of risk.
CHAPTER14: BONDPRICES AND YIELDS
PROBLEM SETS
1. a) Catastrophe bond – A bond that allows the issuer to transfer “catastrophe risk” from the firm to the capital markets. Investors in these...
. Spot rates and forward rates are related to the payments made by bonds and it is shown how these interest rates are used in discounting. Finally, the chapters looks at the concept of duration, which measures a further property of a bond, and this is related to the price/yield relationship. 173...