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(math361)[2008](s)midterm~ma_yxf^_10509.pdf
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Midterm for Math 361
Quantitative Methods for Fixed-Income Securities
April 14, 2008


Problems (with credits indicated in parentheses):
1 Give the definitions of
1.1 (2) a spot-rate curve;
1.2 (2) a forward-rate curve; and
1.3 (2) a par yield curve. Also,
1.4 (2) express a coupon bond price in terms of its yield;
1.5 (2) express a coupon bond price in terms of spot rates;
1.6 (2) express a coupon bond price in terms of forward rates;
1.7 (2) express a forward rate in terms of spot rates;
1.8 (2) express a spot rate in terms of forward rates;
1.9 (2) express a par yield in terms of discount bonds; and
1.10 (2) express a par yield in terms of forward rates.
2 (4) With the coupon bond of 5.5s of July 14, 2011, explain how to calculate the yield of a bond today, April 14, 2008. Suppose the price today is $110, write down the equation for the bond yield (You dont need to solve for the bond yield).
3 Suppose that both 5.5s of April 14, 2011 and 5s of April 14, 2009 are par bonds. Do the following:
3.1 (4) Calculate the DV01s of the two bonds;
3.2 (2) Calculate the modified durations of the two bonds;
3.3 (2) Suppose that you long one unit of 5.5s of April 14, 2011, calculate the units of 5s of April 14, 2009 that you need to short sell to neutralize duration.
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