From agehr at mozart.depaul.edu Mon Mar 3 09:42:00 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Answers to text problems Message-ID: Here are the answers to the problems I assigned in class last week. 1) -3.27% 2) a. 2.833 years b. 2.824 years 3) 1.952 years 6) a. B is shorter duration b. A has longer duration 7) Ranking from longest to shortest Duration: C D A B E. 8) a. Modified duration is 9.26 years b. Duration takes into account size and timing of all cash flows as well as the level of interest rates. c. i. Higher coupon implies lower duration ii. Duration decreases as maturity decreases. 10) a. Duration of obligation 1.16/.16 = 7.25 years. PV of obligation $12.5 million put 6.7 million in the 5-year bond and 5.8 million in the 20-year bond. b. 14.25 million 12) a. market value: $6 million in 5-year zeros and $4 million in 20 years. b. Face value $9.66 million in 5-year bonds and $26.91 in 20-year bonds. From osm1260 at yahoo.com Tue Mar 4 06:54:21 2003 From: osm1260 at yahoo.com (Ofelia Sanchez) Date: Wed Apr 16 16:11:37 2003 Subject: Answers to text problems In-Reply-To: Message-ID: <20030304145421.59346.qmail@web21309.mail.yahoo.com> Hi, Can someone help me figure out problem 12. I am not sure how to get the weights for the 5 yr. zeros and the 20 yr zeros. Thank-you, Ofelia Adam Gehr wrote:Here are the answers to the problems I assigned in class last week. 1) -3.27% 2) a. 2.833 years b. 2.824 years 3) 1.952 years 6) a. B is shorter duration b. A has longer duration 7) Ranking from longest to shortest Duration: C D A B E. 8) a. Modified duration is 9.26 years b. Duration takes into account size and timing of all cash flows as well as the level of interest rates. c. i. Higher coupon implies lower duration ii. Duration decreases as maturity decreases. 10) a. Duration of obligation 1.16/.16 = 7.25 years. PV of obligation $12.5 million put 6.7 million in the 5-year bond and 5.8 million in the 20-year bond. b. 14.25 million 12) a. market value: $6 million in 5-year zeros and $4 million in 20 years. b. Face value $9.66 million in 5-year bonds and $26.91 in 20-year bonds. --------------------------------- Do you Yahoo!? Yahoo! Tax Center - forms, calculators, tips, and more-------------- next part -------------- An HTML attachment was scrubbed... URL: http://mailman.depaul.edu/pipermail/fin335/attachments/20030304/d8466402/attachment.htm From agehr at mozart.depaul.edu Tue Mar 4 09:13:32 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Answers to text problems In-Reply-To: <20030304145421.59346.qmail@web21309.mail.yahoo.com> Message-ID: First you need to calculate the present value of the liability. This is $10 million so you know you need that amount of bonds. Then you calculate the duration of the liability, which is 11 years. You know you must mix 5 and 20 year bonds to have a weighted average duration of 11 years, i.e.: 5x+20(1-x)= 11. Now you need to solve for the weights. Finally multiply the weights times $10 million to get the current market value of the bonds you will buy. On Tue, 4 Mar 2003, Ofelia Sanchez wrote: > > Hi, > Can someone help me figure out problem 12. I am not sure how to get the weights for the 5 yr. zeros and the 20 yr zeros. > Thank-you, > Ofelia > Adam Gehr wrote:Here are the answers to the problems I assigned in class last week. > > 1) -3.27% > > 2) a. 2.833 years > b. 2.824 years > > 3) 1.952 years > > 6) a. B is shorter duration > b. A has longer duration > > 7) Ranking from longest to shortest Duration: C D A B E. > > 8) a. Modified duration is 9.26 years > b. Duration takes into account size and timing of all cash flows as > well as the level of interest rates. > c. i. Higher coupon implies lower duration > ii. Duration decreases as maturity decreases. > > 10) a. Duration of obligation 1.16/.16 = 7.25 years. > PV of obligation $12.5 million > put 6.7 million in the 5-year bond and 5.8 million in the 20-year > bond. > > b. 14.25 million > > 12) a. market value: $6 million in 5-year zeros and $4 million in 20 > years. > > b. Face value $9.66 million in 5-year bonds and $26.91 in 20-year > bonds. > > > > > > --------------------------------- > Do you Yahoo!? > Yahoo! Tax Center - forms, calculators, tips, and more From maobrebski at yahoo.com Tue Mar 11 07:34:43 2003 From: maobrebski at yahoo.com (Marta Obrebski) Date: Wed Apr 16 16:11:37 2003 Subject: Homework for tomorrow (3/11) Message-ID: <20030311153443.30866.qmail@web14804.mail.yahoo.com> Can someone tell me what is the hwk for tomorrow? Thanks, Marta --------------------------------- Do you Yahoo!? Yahoo! Web Hosting - establish your business online-------------- next part -------------- An HTML attachment was scrubbed... URL: http://mailman.depaul.edu/pipermail/fin335/attachments/20030311/134ccda9/attachment.htm From pjones0128 at msn.com Tue Mar 11 07:42:24 2003 From: pjones0128 at msn.com (PAUL JONES) Date: Wed Apr 16 16:11:37 2003 Subject: Homework for tomorrow (3/11) Message-ID: The homework is from Chapter 11, #22 and 28. >From: Marta Obrebski >To: fin335@forums.depaul.edu >Subject: Homework for tomorrow (3/11) >Date: Tue, 11 Mar 2003 07:34:43 -0800 (PST) > > >Can someone tell me what is the hwk for tomorrow? > >Thanks, > >Marta > > > >--------------------------------- >Do you Yahoo!? >Yahoo! Web Hosting - establish your business online _________________________________________________________________ MSN 8 with e-mail virus protection service: 2 months FREE* http://join.msn.com/?page=features/virus From agehr at mozart.depaul.edu Tue Mar 11 09:47:05 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Answers to homework. Message-ID: 22. a) The higher-rated bond will have a lower yield and, therefore, a higher duration. b) The lower coupon bond will have higher duration and greater call protection. c) The lower coupon bond will have greater duration. 28) Firm should pay fixed and receive LIBOR. Cost of loan is 8%. From lsmith1 at depaul.edu Tue Mar 11 14:31:27 2003 From: lsmith1 at depaul.edu (Leslie Smith) Date: Wed Apr 16 16:11:37 2003 Subject: Final Exam Message-ID: Professor, will we be given a study sheet this week for the approaching final?? -------------- next part -------------- An HTML attachment was scrubbed... URL: http://mailman.depaul.edu/pipermail/fin335/attachments/20030311/7d2f9b18/attachment.htm From agehr at mozart.depaul.edu Tue Mar 11 15:44:59 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Final Exam In-Reply-To: Message-ID: No, but I will be discussing the final tomorrow in class. On Tue, 11 Mar 2003, Leslie Smith wrote: > Professor, will we be given a study sheet this week for the approaching > final?? > From agehr at mozart.depaul.edu Mon Mar 3 09:42:00 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Answers to text problems Message-ID: Here are the answers to the problems I assigned in class last week. 1) -3.27% 2) a. 2.833 years b. 2.824 years 3) 1.952 years 6) a. B is shorter duration b. A has longer duration 7) Ranking from longest to shortest Duration: C D A B E. 8) a. Modified duration is 9.26 years b. Duration takes into account size and timing of all cash flows as well as the level of interest rates. c. i. Higher coupon implies lower duration ii. Duration decreases as maturity decreases. 10) a. Duration of obligation 1.16/.16 = 7.25 years. PV of obligation $12.5 million put 6.7 million in the 5-year bond and 5.8 million in the 20-year bond. b. 14.25 million 12) a. market value: $6 million in 5-year zeros and $4 million in 20 years. b. Face value $9.66 million in 5-year bonds and $26.91 in 20-year bonds. From osm1260 at yahoo.com Tue Mar 4 06:54:21 2003 From: osm1260 at yahoo.com (Ofelia Sanchez) Date: Wed Apr 16 16:11:37 2003 Subject: Answers to text problems In-Reply-To: Message-ID: <20030304145421.59346.qmail@web21309.mail.yahoo.com> Hi, Can someone help me figure out problem 12. I am not sure how to get the weights for the 5 yr. zeros and the 20 yr zeros. Thank-you, Ofelia Adam Gehr wrote:Here are the answers to the problems I assigned in class last week. 1) -3.27% 2) a. 2.833 years b. 2.824 years 3) 1.952 years 6) a. B is shorter duration b. A has longer duration 7) Ranking from longest to shortest Duration: C D A B E. 8) a. Modified duration is 9.26 years b. Duration takes into account size and timing of all cash flows as well as the level of interest rates. c. i. Higher coupon implies lower duration ii. Duration decreases as maturity decreases. 10) a. Duration of obligation 1.16/.16 = 7.25 years. PV of obligation $12.5 million put 6.7 million in the 5-year bond and 5.8 million in the 20-year bond. b. 14.25 million 12) a. market value: $6 million in 5-year zeros and $4 million in 20 years. b. Face value $9.66 million in 5-year bonds and $26.91 in 20-year bonds. --------------------------------- Do you Yahoo!? Yahoo! Tax Center - forms, calculators, tips, and more-------------- next part -------------- An HTML attachment was scrubbed... URL: http://mailman.depaul.edu/pipermail/fin335/attachments/20030304/d8466402/attachment-0001.htm From agehr at mozart.depaul.edu Tue Mar 4 09:13:32 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Answers to text problems In-Reply-To: <20030304145421.59346.qmail@web21309.mail.yahoo.com> Message-ID: First you need to calculate the present value of the liability. This is $10 million so you know you need that amount of bonds. Then you calculate the duration of the liability, which is 11 years. You know you must mix 5 and 20 year bonds to have a weighted average duration of 11 years, i.e.: 5x+20(1-x)= 11. Now you need to solve for the weights. Finally multiply the weights times $10 million to get the current market value of the bonds you will buy. On Tue, 4 Mar 2003, Ofelia Sanchez wrote: > > Hi, > Can someone help me figure out problem 12. I am not sure how to get the weights for the 5 yr. zeros and the 20 yr zeros. > Thank-you, > Ofelia > Adam Gehr wrote:Here are the answers to the problems I assigned in class last week. > > 1) -3.27% > > 2) a. 2.833 years > b. 2.824 years > > 3) 1.952 years > > 6) a. B is shorter duration > b. A has longer duration > > 7) Ranking from longest to shortest Duration: C D A B E. > > 8) a. Modified duration is 9.26 years > b. Duration takes into account size and timing of all cash flows as > well as the level of interest rates. > c. i. Higher coupon implies lower duration > ii. Duration decreases as maturity decreases. > > 10) a. Duration of obligation 1.16/.16 = 7.25 years. > PV of obligation $12.5 million > put 6.7 million in the 5-year bond and 5.8 million in the 20-year > bond. > > b. 14.25 million > > 12) a. market value: $6 million in 5-year zeros and $4 million in 20 > years. > > b. Face value $9.66 million in 5-year bonds and $26.91 in 20-year > bonds. > > > > > > --------------------------------- > Do you Yahoo!? > Yahoo! Tax Center - forms, calculators, tips, and more From maobrebski at yahoo.com Tue Mar 11 07:34:43 2003 From: maobrebski at yahoo.com (Marta Obrebski) Date: Wed Apr 16 16:11:37 2003 Subject: Homework for tomorrow (3/11) Message-ID: <20030311153443.30866.qmail@web14804.mail.yahoo.com> Can someone tell me what is the hwk for tomorrow? Thanks, Marta --------------------------------- Do you Yahoo!? Yahoo! Web Hosting - establish your business online-------------- next part -------------- An HTML attachment was scrubbed... URL: http://mailman.depaul.edu/pipermail/fin335/attachments/20030311/134ccda9/attachment-0001.htm From pjones0128 at msn.com Tue Mar 11 07:42:24 2003 From: pjones0128 at msn.com (PAUL JONES) Date: Wed Apr 16 16:11:37 2003 Subject: Homework for tomorrow (3/11) Message-ID: The homework is from Chapter 11, #22 and 28. >From: Marta Obrebski >To: fin335@forums.depaul.edu >Subject: Homework for tomorrow (3/11) >Date: Tue, 11 Mar 2003 07:34:43 -0800 (PST) > > >Can someone tell me what is the hwk for tomorrow? > >Thanks, > >Marta > > > >--------------------------------- >Do you Yahoo!? >Yahoo! Web Hosting - establish your business online _________________________________________________________________ MSN 8 with e-mail virus protection service: 2 months FREE* http://join.msn.com/?page=features/virus From agehr at mozart.depaul.edu Tue Mar 11 09:47:05 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Answers to homework. Message-ID: 22. a) The higher-rated bond will have a lower yield and, therefore, a higher duration. b) The lower coupon bond will have higher duration and greater call protection. c) The lower coupon bond will have greater duration. 28) Firm should pay fixed and receive LIBOR. Cost of loan is 8%. From lsmith1 at depaul.edu Tue Mar 11 14:31:27 2003 From: lsmith1 at depaul.edu (Leslie Smith) Date: Wed Apr 16 16:11:37 2003 Subject: Final Exam Message-ID: Professor, will we be given a study sheet this week for the approaching final?? -------------- next part -------------- An HTML attachment was scrubbed... URL: http://mailman.depaul.edu/pipermail/fin335/attachments/20030311/7d2f9b18/attachment-0001.htm From agehr at mozart.depaul.edu Tue Mar 11 15:44:59 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Final Exam In-Reply-To: Message-ID: No, but I will be discussing the final tomorrow in class. On Tue, 11 Mar 2003, Leslie Smith wrote: > Professor, will we be given a study sheet this week for the approaching > final?? >