Bond:,1. Accrued interest: If there are 183 days between interest settlement dates and it is 50 days since the last payment. The coupon rate is 3.5%. The quoted price is $950. The face value is $1000. What is the clean price? What is the accrued interest? What is the price that investors pay?,2. A bond pays semi-annual coupon of $40. In half a year, price increases from $950 to $1000. a) what is the capital gain yield? b) what is the income yield? c) what is the holding period return in this half a year?,,Fixed Income:,3. Describe variables that affect demand and supply for bonds? How do the supply curve and demand curve shift if the variables increase?,4. Consider a bond with a 7 percent semi-annual coupon and a face value of $1000. Complete the following table. Note that yield to maturity is quoted annually. Describe the relation between bond price and yield to maturity.,Years to Maturity Yield to Maturity(percent) Current Prices,3 5 ,3 7 ,6 7 ,9 8 ,9 950,,5. One-year T-bill rates over the next four years are expected to be 3%, 4%, 5%, and 5.5%. If four-year T-bonds are yielding 4.5%, what is the liquidity premium on this bond?,6. If a 90 day Canadian promissory note for $1,000 is sold for a 1% discount. What is its effective yield? Note all yields are quoted annually.,,Equity:,7. Dividend at present is $4, equity cost is 10%, and growth rate is 5%. What is the equity price?,,
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