Scribd Logo
Upload

Welcome to Scribd!

  • 873 views

    FINS 2624 Quiz 2 Answers

    Uploaded by

    sagarox7
    This document is a review of an online quiz on portfolio management and the term structure of interest rates. It provides the questions, selected answers, and score for an online quiz consisting of 10 multiple-choice questions. The student answered all 10 questions correctly and received a score of 100% on the quiz.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    FINS 2624 Quiz 2 Answers

    Uploaded by

    sagarox7
    873 views2 pages
    This document is a review of an online quiz on portfolio management and the term structure of interest rates. It provides the questions, selected answers, and score for an online quiz consisting of 10 multiple-choice questions. The student answered all 10 questions correctly and received a score of 100% on the quiz.

    Original Description:

    FINS2624

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document is a review of an online quiz on portfolio management and the term structure of interest rates. It provides the questions, selected answers, and score for an online quiz consisting of 10 multiple-choice questions. The student answered all 10 questions correctly and received a score of 100% on the quiz.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    873 views2 pages

    FINS 2624 Quiz 2 Answers

    Uploaded by

    sagarox7
    This document is a review of an online quiz on portfolio management and the term structure of interest rates. It provides the questions, selected answers, and score for an online quiz consisting of 10 multiple-choice questions. The student answered all 10 questions correctly and received a score of 100% on the quiz.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 2

    Review Test Submission: Online quiz 2

    1 of 2

    FINS2624-Portfolio Mgmt - s1/2013

    https://lms-blackboard.telt.unsw.edu.au/webapps/assessment/review/re...

    Online quizzes

    Online Quiz 2

    Review Test Submission: Online quiz 2

    Review Test Submission: Online quiz 2

    User

    David WANG

    Submitted

    27/03/13 20:46

    Status

    Completed

    Score

    100 out of 100 points

    Instructions

    Question 1

    10 out of 10 points

    Suppose you observe the following two bonds in the market:


    A one-year zero-coupon bond with a face value of $1000 trading at $900.
    A two-year bond paying an annual coupon of $120 and a face value of $1000 trading at par.
    What can you conclude about the arbitrage-free forward rate between times 1 and 2, f ?
    12
    Selected Answer:

    It is 13%

    Question 2

    10 out of 10 points

    Which of the following are important differences between the theoretical concept of the term structure
    of interest as we've discussed it in class, and the zero-coupon interest rates of government bonds we
    use to approximate it, e.g. in slide two of lecture two?
    Selected Answer:

    D. A and B

    Question 3

    10 out of 10 points

    Suppose the current term structure of interest rates is as follows:


    y
    1 = 4%

    y2 = 5%
    y3 = 9%
    y4 = 10%
    y5 = 11%
    What is the arbitrage-free forward rate between times 2 and 4, f ? Give your answer in percentage
    24
    units with two decimal points, e.g. answer 6.34 if you think the forward rate is 0.06342.
    Selected Answer:

    15.24

    Question 4

    10 out of 10 points

    The expectations theory of the term structure of interest rates states


    that
    Selected
    Answer:

    forward rates are market expectations of future


    interest rates.

    Question 5

    10 out of 10 points

    Suppose you observe the three following bonds in the market:


    OK

    27/03/2013 10:10 PM

    Review Test Submission: Online quiz 2

    2 of 2

    https://lms-blackboard.telt.unsw.edu.au/webapps/assessment/review/re...

    A two-year zero-coupon bond with a face value of $100 trading for $89.00
    A two-year bond with a face value of $100 and a $10 coupon trading for $107.51
    A two-year bond with a face value of $100 and a $20 coupon trading for $127.53
    Which of the following statements is true?
    Selected Answer:

    B. There is a possible arbitrage trade involving a short position in bond C

    Question 6

    10 out of 10 points

    Which of the following are valid reasons why the yield on bonds with
    long times to maturity may include a liquidity premium?
    Selected Answer:

    All of the above

    Question 7

    10 out of 10 points

    Suppose you have an investment horizon of 3 years and hold a 5 year zero-coupon bond. You would
    be facing:
    Selected Answer:

    B. Liquidity risk

    Question 8

    10 out of 10 points

    Suppose you want to find the arbitrage-free forward rate between time 1 and 2, f . What information
    12
    would be sufficient?
    A - The price of a two-year bond with an annual coupon payment of $10 and a face value of $100.
    B - The price of a two-year bond with an annual coupon payment of $20 and a face value of $100.
    C - The price of a one-year zero-coupon bond with a face value of $100.

    Selected Answer:

    4. Any of the above combinations.

    Question 9

    10 out of 10 points

    Suppose you observe the following interest rates in the market:


    y = 6%
    3
    f = 6%
    12
    f = 5%
    13
    What is the arbitrage-free two-year spot rate, y ?
    2
    Selected Answer:

    7%

    Question 10

    10 out of 10 points

    One way of interpreting the term structure of interest rates is that it


    shows the relationship between:
    Selected
    Answer:

    the yield on zero-coupon bonds and the time to maturity


    of those bonds.

    Wednesday, 27 March 2013 20:46:20 o'clock EST

    27/03/2013 10:10 PM

    You might also like