both bonds. Coupon rate Time to maturity Yield-to-maturity Bond A 5% 5 yrs 7.2% Bond B 5% 25 yrs 7.2% Recalculate the bonds’ values if the yield to maturity changes to 9.4%. Which bond is more sensitive to the changes in the yield? Will this always be the case? When the yield-to-maturity is 7.2%‚ the bond prices are‚ respectively‚ 1 1 1.036 0.036 1 1.036 0.036 1 1.047 0.047 1 1.047 0.047 25 1000 1.036 1000 1.036 908.98 1 25 746.58 When the yield-to-maturity is 9.4%‚ the bond prices are
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Problem with Capability Maturity Model (CMM) Anbesa Jima Department of Computing Science‚ Adama Science and Technology University‚ Ethiopia Abstract The Capability Maturity Model is an organizational model that describes 5 evolutionary stages (levels) in which an organization manages its processes. The Capability Maturity Model does come with some drawbacks. It is a goal‚ not a method‚ being used just as stamp of approval‚ doesn’t say anything about software‚ and doesn’t help in a crisis‚ only
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fair value of the security is “readily determinable”‚ impairments‚ and different issues regarding being classified as held-to-maturity. The securities are “readily determinable” because it is in the over-the-counter market. An impairment should be accounted for with a debit to Loss on Impairment and a credit to the Security. The issues with classifying it as a held-to-maturity are discussed in further depth below. Determinable Fair Value of a Security Teton Co. trades on the over-the-counter
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FNCE90011 Derivative Securities Topic 1 Fundamentals Topic Outline Basic Concepts Option Payoff and Profit Diagrams Miscellaneous Complicated Payoffs Appendix: Market Structure References Hull (8th edition) Chapters 1‚ 4.2‚ 5.2‚ 9‚ 11 Hull (7th edition) Chapters 1‚ 4.2‚ 5.2‚ 9‚ 11 Hull (6th edition) Chapters 1‚ 4.2‚ 5.2‚ 8‚ 10 Copyright © John C. Handley 2012. 1. BASIC CONCEPTS What is a derivative ? A derivative is an asset/security whose value is completely determined by the
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A ________ pays the owner a fixed coupon payment every year until the maturity date‚ when the 6) _______ ________ value is repaid. A) coupon bond; face B) discount bond; face C) coupon bond; discount D) discount bond;
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between the price of the American and the equivalent European options with the same strike and the same time to maturity. 2. Use Solver to find the implied volatilities for all put options with strike prices between $70 and $100 that are divisible by 5 and that are available for a given option chain. Save your implied volatility results in a separate worksheet along with maturity and strike price or add them to the data file. Once you have done this for all 3 option chains‚ you will need to
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value bonds paying a 7% semi-annual coupon with 15 years to maturity. The bonds were originally issued at par value. a. What was the original yield to maturity on the bonds? They were issued at par…so the YTM = Coupon rate: 7% b. If the current price of the bonds is $875‚ what is the yield to maturity of the bonds TODAY? 1000 FV .07(1000)÷2= PMT (15-7)*2 = N -875 PV I/Y = 4.623*2 = 9.25% c. If the yield to maturity computed in part b remains constant‚ what will be the price
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has a maturity value of $1‚000 and makes semiannual interest payments of $40. If you require a 10 percent nominal yield to maturity on this investment‚ what is the maximum price you should be willing to pay for the bond? N = 40 I/Y = 5 PV = -828.41 PMT = 40 FV = 1000 Bond value--semiannual payment 3. A bond that matures in 12 years has a 9 percent semiannual coupon (i.e.‚ the bond pays a $45 coupon every six months) and a face value of $1‚000. The bond has a nominal yield to maturity of 8 percent
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with annual or semiannual interest payments. • Explain why the market value of an outstanding fixed-rate bond will fall when interest rates rise on new bonds of equal risk‚ or vice versa. • Calculate the current yield‚ the yield to maturity‚ and/or the yield to call on a bond. • Differentiate between interest rate risk‚ reinvestment rate risk‚ and default risk. • List major types of corporate bonds and distinguish among them. • Explain the importance of bond ratings
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Chapter 6: Interest Rates The difficulty of these questions as seen by students will depend on (1) what was discussed in class and (2) how long students have to answer the questions. If time is not an issue‚ then many of the questions could be classified as EASY‚ but under exam conditions with time pressure‚ many might be regarded as being CHALLENGING. So‚ consider the amount of time students have when selecting questions for an exam. Note that there is some overlap between the True/False and the
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