Question #1 of 11 Question ID: 1281468

If the ve-year spot rate is 6.1 percent and the four-year spot rate is 5.9 percent, what is the

only rate that can be computed?

A) The one-year forward rate starting four years from today is 6.9%.

B) The four-year forward rate starting one year from today is 7.4%.

C) The four-year forward rate starting one year from today is 6.9%.

D) The one-year forward rate starting four years from today is 7.4%.

Question #2 of 11 Question ID: 1281457

Assume the one-year spot rate is 4 percent, the two-year spot rate is 4.5 percent, and the

three-year spot rate is 5 percent. Which of the following statements is true?

A) The one-year rate that will exist one year from today is 5.5 percent.

The rate that an investor can earn on a sum invested today for the next three years
B)
is 5.5 percent.

C) The one-year rate that will exist two years from today is 5 percent.

D) The two-year rate that will exist one year from today is 5.5 percent.

Question #3 of 11 Question ID: 1281458

If the one-year spot rate is 7 percent and the one-year forward rate is 7.4 percent, what is
the two-year spot rate?

A) 7.20%.

B) 7.27%.

C) 7.12 %.

D) 7.40%.
Use the following Treasury bond prices to answer the next four questions. Assume the
prices are for settlement on June 1, 2005, today's date. Assume semiannual coupon
payments:

Coupon Maturity Price

7.500% 12/1/2005 102−9
12.375% 6/1/2006 107−15
6.750% 12/1/2006 104−15

5.000% 6/1/2007 102−9+

Question #4 - 7 of 11 Question ID: 1281464

The discount factors associated with the bonds maturing in December 2005 and June 2006,
are closest to:

A) 0.9778 / 0.9696.

B) 0.9696 / 0.9858.

C) 0.9858 / 0.9546.

D) 0.9546 / 0.9696.

Question #5 - 7 of 11 Question ID: 1281465

The spot rates associated with the discount factors determined in the previous question are
closest to:

A) 2.88 % / 4.70%.

B) 3.26% / 5.87%.

C) 1.82% / 7.56%.

D) 2.25% / 4.87%.

Question #6 - 7 of 11 Question ID: 1281466

Given the spot rates for the 6-month and 1-year maturing bond, the 6-month forward rate 6
months from now is closest to:

A) 7.28%.

B) 6.54%.

C) 5.86%.

D) 6.04%.

Question #7 - 7 of 11 Question ID: 1281467

The yield to maturity (YTM) for the bond maturing June 2007 is closest to:

A) 3.79%.

B) 2.93%.

C) 3.02%.

D) 3.27%.

Use the Treasury bond prices given below for the following four problems. Assume the

prices are for settlement on June 1, 2005, today's date. Assume semiannual coupon
payments:

Coupon Maturity Price

6.00% 12/1/2005 99−15

7.00% 6/1/2006 98−27+

8.00% 12/1/2006 101−29

9.00% 6/1/2007 102−9

Question #8 - 10 of 11 Question ID: 1281460

The discount factors associated with the bonds maturing in December 2005 and June 2006,
respectively, are closest to:

A) 0.9657; 0.9225.

B) 0.9458; 0.9013.
C) 0.9587; 0.9157.

D) 0.9319; 0.8769.

Question #9 - 10 of 11 Question ID: 1281461

The spot rates associated with the discount factors of the previous problem are closest to:

A) 5.48%; 6.78%.

B) 7.10%; 8.23%.

C) 4.87%; 6.23%.

D) 6.26%; 7.05%.

Question #10 - 10 of 11 Question ID: 1281462

Given the spot rates for the 6-month and 1-year maturing bond, the forward rate inherent in
those gures is closest to:

A) 9.37%.

B) 5.74%.

C) 6.96%.

D) 4.68%.

Question #11 of 11 Question ID: 1281456

 Maturity
STRIP Price Spot Rate Forward Rate
(Years)

0.5 98.7654 2.50% 2.50%

1.0 97.0662 3.00% 3.50%

1.5 95.2652 3.26% 3.78%

2.0 93.2775 ?.??% ?.??%

The 2-year spot rate is closest to:

A) 3.42%.

B) 3.51%.

C) 3.87%.

D) 4.02%.