Suppose you want to hedge a $430 million bond portfolio with a duration of 8.8 years using 10-year Treasury note futures with a duration of 6.7 years, a futures price of 107, and 97 days to expiration. The multiplier on Treasury note futures is $100,000. How many contracts do you buy or sell? (Do not round intermediate calculations. Round your answer to the nearest whole number.)
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- Use the following zero-coupon bond prices to answer the next questions: Days to Maturity Zero-Coupon Bond Price 90 180 270 360 0.99009 0.97943 0.96525 0.95238 Suppose you are the counterparty for a lender who enters into an FRA to hedge the lending rate on $10m for a 90-day loan commencing on day 270. What positions in zero-coupon bonds would you use to hedge the risk on the FRA?What is the Macaulay duration of a 7 percent semiannual coupon bond with two years to maturity and a current price of $1,055.30? (Note: You are required to solve the problem by calculating "Years \times PV / Bond Price" for each cash flow and summing the results. YTM and PV must be calculated using a financial calculator. Round your answer to four decimal places.)The promised cash flows of three securities are listed below. If the cash flows are risk-free, and the risk-free interest rate is 5.0%, determine the no-arbitrage price of each security before the first cash flow is paid. Security Cash Flow Today ($) Cash Flow in One Year ($) A 800 800 B 0 1600 C 1,600 0 The no-arbitrage price of security A is how much? ? (Round to the nearest cent.) The no-arbitrage price of security B is how much? ? (Round to the nearest cent.) The no-arbitrage price of security C is how much? ? (Round to the nearest cent.)
- A Treasury bond that settles on October 18, 2019, matures on March 30, 2038. The coupon rate is 5.45 percent, and the bond has a yield to maturity of 4.66 percent. What are the Macaulay duration and modified duration? (Use the duration functions in Excel to solve the problem. Do not round intermediate calculations. Round your answers to 4 decimal places.) X Answer is complete but not entirely correct. Macaulay duration Modified duration 12.0670 11.5297You submit a noncompetitive bid in Dec. 2020 to purchase a 28-day RM1,000 Treasury bill, and you find that you are buying the bond for RM999.88722. What are the: a) discount rate % b) investment rate %?Assume the zero-coupon yields on default-free securities are as summarized in the following table: (Click on the following icon in order to copy its contents into a spreadsheet.) Maturity (years) Zero-coupon YTM 1 6.30% 2 6.90% 3 7.30% 4 7.70% 5 8.00% What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 8%? What is the yield to maturity for this bond? What is the price of a three-year, default-free security with a face value of $1,000 and an annual coupon rate of 8%? The price is $1894.57. (Round to the nearest cent.)
- Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Price $983.78 865.89 797.92 732.00 660.24 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4?A bank wishes to hedge its $30 million face value bond portfolio (currently priced at 99 percent of par). The bond portfollo has a duration of 9.75 years. It will hedge with T-bond futures ($100,000 face) priced at 98 percent of par. The duration of the T-bonds to be delivered is nine years. How many contracts are needed to hedge? Should the contracts be bought or sold? Ignore basis risk.Suppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Show Transcribed Text B) How could you construct a 1-year forward loan beginning in year 3? (Face Value) C) How could you construct a 1-year forward loan beginning in year 4? (Face Value) Required A Required B Complete this question by entering your answers in the tabs below. Face value Rate of synthetic loan → Show Transcribed Text Price $ 970.93 898.39 836.92 How could you construct a 1-year forward loan beginning in year 3? Note: Round your Rate of synthetic loan answer to 2 decimal places. Required A 776.20 685.42 Required B Face value Rate of synthetic loan Required C 7.85 % Required C How could you construct a 1-year forward loan beginning in year 4? Note: Round your Rate of synthetic loan answer to 2 decimal places. Ċ 13.29 %
- A Treasury bond that settles on October 18, 2022, matures on March 30, 2041. The coupon rate is 6.10 percent, and the bond has a yield to maturity of 5.57 percent. What are the Macaulay duration and modified duration? Note: Use the duration functions in Excel to solve the problem. Do not round intermediate calculations. Round your answers to 4 decimal places. Answer is complete but not entirely correct. Macaulay duration 11.4179 Modified duration 10.8154 XA Treasury bond that settles on October 18, 2019, matures on March 30, 2038. The coupon rate is 5.35 percent, and the bond has a yield to maturity of 4.52 percent. What are the Macaulay duration and modified duration? (Use the duration functions in Excel to solve the problem. Do not round intermediate calculations, Round your answers to 4 decimal places.) Answer is not complete. Macaulay duration Modified duration 12.2800A 1-year Treasury bond currently yields 6.0%, and a 2-year bond yields 7.0%. Mr. A, an investor who want to invest for a 2-year horizon is choosing between buying the 2-year security and hold it for 2 years and buy a 1-year security and hold it for 1 year and reinvest the proceeds in another 1-year security. Holding the pure expectation theory, what would be the rate of the 1-year rate 1 year from now so that options of Mr. A will be indifferent? 8% 6% 7% 6.5%