365 Basis) Does An Investor Earn On The Treasury Bill For The 90-Day Period?
CHAPTER 6
Interest Rate Futures
Practice Questions
Problem 6.8.
The price of a 90-day Treasury bill is quoted as 10.00. What continuously compounded return (on an actual/365 basis) does an investor earn on the Treasury bill for the 90-day period?
The cash price of the Treasury bill is
The annualized continuously compounded return is
Problem 6.9.
It is May 5, 2010. The quoted price of a government bond with a 12% coupon that matures on July 27, 2014, is 110-17. What is the cash price?
The number of days between January 27, 2010 and May 5, 2010 is 98. The number of days between January 27, 2010 and July 27, 2010 is 181. The accrued interest is therefore The quoted price is 110.5312. The cash price is therefore or $113.78. …show more content…
dollar cash flows to the following Canadian dollar cash flows: This is a Canadian dollar LIBOR futures contract where the principal amount is.
Problem 6.28.
Portfolio A consists of a one-year zero-coupon bond with a face value of $2,000 and a 10-year zero-coupon bond with a face value of $6,000. Portfolio B consists of a 5.95-year zero-coupon bond with a face value of $5,000. The current yield on all bonds is 10% per annum.
(a) Show that both portfolios have the same duration.
(b) Show that the percentage changes in the values of the two portfolios for a 0.1% per annum increase in yields are the same.
(c) What are the percentage changes in the values of the two portfolios for a 5% per annum increase in yields?
a) The duration of Portfolio A is Since this is also the duration of Portfolio B, the two portfolios do have the same duration.
b) The value of Portfolio A is When yields increase by 10 basis points its value becomes The percentage decrease in value is The value of Portfolio B is When yields increase by 10 basis points its value becomes The percentage decrease in value is The percentage changes in the values of the two portfolios for a 10 basis point increase in yields are therefore the
Interest Rate Futures
Practice Questions
Problem 6.8.
The price of a 90-day Treasury bill is quoted as 10.00. What continuously compounded return (on an actual/365 basis) does an investor earn on the Treasury bill for the 90-day period?
The cash price of the Treasury bill is
The annualized continuously compounded return is
Problem 6.9.
It is May 5, 2010. The quoted price of a government bond with a 12% coupon that matures on July 27, 2014, is 110-17. What is the cash price?
The number of days between January 27, 2010 and May 5, 2010 is 98. The number of days between January 27, 2010 and July 27, 2010 is 181. The accrued interest is therefore The quoted price is 110.5312. The cash price is therefore or $113.78. …show more content…
dollar cash flows to the following Canadian dollar cash flows: This is a Canadian dollar LIBOR futures contract where the principal amount is.
Problem 6.28.
Portfolio A consists of a one-year zero-coupon bond with a face value of $2,000 and a 10-year zero-coupon bond with a face value of $6,000. Portfolio B consists of a 5.95-year zero-coupon bond with a face value of $5,000. The current yield on all bonds is 10% per annum.
(a) Show that both portfolios have the same duration.
(b) Show that the percentage changes in the values of the two portfolios for a 0.1% per annum increase in yields are the same.
(c) What are the percentage changes in the values of the two portfolios for a 5% per annum increase in yields?
a) The duration of Portfolio A is Since this is also the duration of Portfolio B, the two portfolios do have the same duration.
b) The value of Portfolio A is When yields increase by 10 basis points its value becomes The percentage decrease in value is The value of Portfolio B is When yields increase by 10 basis points its value becomes The percentage decrease in value is The percentage changes in the values of the two portfolios for a 10 basis point increase in yields are therefore the