BUFN 762 Final Exam Solution (attached solution)

BUFN 762  Final Exam Solution (attached solution)

Don't use plagiarized sources. Get Your Custom Essay on
BUFN 762 Final Exam Solution (attached solution)
For as low as $13/Page
Order Essay

 

 

Final Exam Solution

Final Exam Solution

 

   1. Briefly explain why many corporations prefer to issue callable long-term corporate bonds rather than noncallable long-term bonds.

 

 

   2. Briefly explain the idea behind an Immunized Bond Portfolio.

 

 

 

   3. Explain why an Interest Only Strip (IO MBS) usually gains value when interest rates increase.

 

 

 

   4. Briefly explain what happens to the price of a straight bond (no options) when the yield increases – and why.

 

 

 

   5. Briefly describe how the Federal Reserve moves rates in the Federal Funds Market.

 

 

 

   6. Suppose that you want to hedge the interest rate risk of a Fixed Income Security that has negative convexity.   Suppose that you can create a perfect hedge with futures and options (paying a premium to buy the options).   As an alternative, you can use hedge with futures alone.   If you believe that the true volatility

 will be much lower than the implied volatility of the options, which alternative should you choose?   Why?

 

 

 

   7.   Briefly explain the idea behind splitting a companion CMO tranche into a floating rate class and an inverse rate floating rate class.

 

 

 

   8. Suppose that a fixed cash flow treasury bond is split into two bonds, a floater and an inverse floater.   Briefly explain why the Inverse Floating Rate Bond has a much longer effective duration than the underlying fixed cash flow.

 

 

 

 

 

   9. Briefly explain why Salomon Brothers was able to make a profit while they were squeezing the Two-Year Treasury.

 

 

 

   10. Briefly explain why straight Corporate Bonds have a higher yield than Treasury Bonds with the same coupon rate and maturity.

 

 

   11. Theoretical Spot Rates will be close to Zero Coupon Bond Yields.   Explain why there may be small differences in the real world.

 

 

 

   12. Assume the following (all rates are stated annually with semiannual compounding):

 

       a. Six Month Spot Rate is 2.5%

       b. Six Month Forward rate starting at month six is

 2.8%

       c. Six Month Forward rate starting at month 12 is 3.2%

 

 Then find the price of an 18 month Zero Coupon Bond (Treasury Strip).

 

 

 

   13. Name three features that you feel should be included in a Term Structure Model.

 

 

 

   14. Describe why some bonds are On Special in the Repo Market.

 

 

 

   15. State the most useful thing you learned in this course and why you think it is useful.

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
Live Chat 1 {763} 309 4299EmailWhatsApp

Order your essay today and save 20% with the discount code FREELANCE