Booster Session 01

Question 01

Question 02
The annual yield-to-maturity, stated for with a periodicity of 12, for a four-year, zero-coupon
bond priced at 75 per 100 of par value is closest to:
A. 6.25%.
B. 7.21%.
C. 7.46%
The following information relates to question 3, 4 and 5.

Question 3
The full price that Bond G settles at on 16 June 2020 is closest to:
A. 102.36
B. 103.10
C. 103.65
Question 4
The accrued interest per 100 of par value for Bond G on the settlement date of 16 June 2020
is closest to:
A. 0.46.
B. 0.73.
C. 0.92
Question 5
The flat price for Bond G on the settlement date of 16 June 2020 is closest to:
A. 102.18.
B. 103.10.
C. 104.02
Question 6
An investor purchases a nine-year, 7% annual coupon payment bond at a price equal to par
value. After the bond is purchased and before the first coupon is received, interest rates
increase to 8%. The investor sells the bond after five years. Assume that interest rates
remain unchanged at 8% over the five-year holding period.
a. Per 100 of par value, wat is the future value of the reinvested coupon payments at
the end of the holding period?
b. What is the capital gain/loss per 100 of par value resulting from the sale of the bond
at the end of the five-year holding period?
c. Assuming that all coupons are reinvested over the holding period, calculate investor’s
five-year horizon yield.
Question 7:
An investor buys a three-year bond with a 5% coupon rate paid annually. The bond, with a
yield-to-maturity of 3%, is purchased at a price of 105.657223 per 100 of par value.
Assuming a 5-basis point change in yield-to-maturity, what is the bond’s approximate
modified duration?
Question 8:
An investor buys a 6% annual payment bond with three years to maturity. The bond has a
yield-to-maturity of 8% and is currently priced at 94.845806 per 100 of par. Calculate bond’s
Macaulay duration.
Question 09:
Assuming no change in the credit risk of a bond, the presence of an embedded put option:
A. reduces the effective duration of the bond.
B. increases the effective duration of the bond.
C. does not change the effective duration of the bond.