Author: Anonymous

Every small business is considered an entrepreneurial venture because it is independently owned.

A pension fund manager is analyzing the Treasury yield curve. She has observed the following discount factors: 1-year discount factor: [df1] 2-year discount factor: [df2] 3-year discount factor: [df3] 4-year discount factor: [df4] She wants to compute the [year]-year annualized spot rate. What is the [year]-year spot rate?   Round your answer to the nearest three decimals if needed. Type your answer in percentage and not in decimals (i.e. 5.2 and not 0.052). Do not type the % symbol.

You are working in the treasury department of a multinational energy company. The CFO is considering issuing new corporate bonds to lock in long-term funding, but wants to evaluate whether the firm would be better off rolling short-term debt instead. You are given the following annual spot rates (annual compounding): 1-year spot rate: [spot1]% 2-year spot rate: [spot2]% 3-year spot rate: [spot3]% 4-year spot rate: [spot4]% 5-year spot rate: [spot5]% 6-year spot rate: [spot6]% 7-year spot rate: [spot7]% 8-year spot rate: [spot8]%   The CFO turns to you and says: “We need to know the market’s view on future short-term borrowing costs. Find the [length]-year forward rate starting at year [start] so we can compare rolling loans against issuing longer-term debt today.”   What is the [length]-year forward rate starting at year [start]?   Round your answer to the nearest three decimals if needed. Type your answer in percentage and not in decimals (i.e. 5.2 and not 0.052). Do not type the % symbol.

You are working on the interest rate derivatives desk of a large investment bank. A corporate client is negotiating an interest rate swap to lock in fixed funding for its debt. To quote the deal, you need the correct par swap rate, which is the fixed rate that makes the present value of the fixed leg equal to the present value of the floating leg at initiation. Your system provides the following annual discount factors: 1-year discount factor: [df1] 2-year discount factor: [df2] 3-year discount factor: [df3] 4-year discount factor: [df4] 5-year discount factor: [df5] 6-year discount factor: [df6] 7-year discount factor: [df7] 8-year discount factor: [df8] Your manager turns to you and says: “Find the [year]-year par swap rate — the rate that makes the fixed payments exactly equal to par at that maturity.” What is the [year]-year par swap rate?Round your answer to the nearest three decimals if needed. Type your answer in percentage and not in decimals (i.e. 5.2 and not 0.052). Do not type the % symbol.

You are a bond trader on the fixed income desk of a global investment bank. A client asks you to price several zero-coupon bonds with different maturities. To do this, you need to compute the appropriate discount factor for future cash flows. The trading system provides you with the following spot rates (annual compounding): 1-year spot rate: [spot1] 2-year spot rate: [spot2] 3-year spot rate: [spot3] 4-year spot rate: [spot4] 5-year spot rate: [spot5] 6-year spot rate: [spot6] 7-year spot rate: [spot7] 8-year spot rate: [spot8] Your manager turns to you and says: “Compute the discount factor for a cash flow to be received in [year] years.” What is the [year]-year discount factor? Round your answer to the nearest three decimals if needed. Type your answer in percentage and not in decimals (i.e. 5.2 and not 0.052). Do not type the % symbol.  

A renewable energy company issues a 3-year floating-rate note (FRN) to finance the construction of offshore wind turbines. Because investors are concerned about rising interest rates, the company sets a coupon cap so that annual coupon payments cannot exceed a maximum rate. Analysts value the note using a 3-year binomial interest-rate lattice, calibrated from market par and forward rates. Bond details Face Value: $100.00 Reset/Payment Frequency: Annual (coupon paid at each year-end) Reference Rate: The 1-year short rate at the start of each period (from the lattice) Quoted Constant Spread: [s]% (added to the reference rate each year) Coupon Cap: [cap]% (coupon rate cannot exceed this level) Today’s 1-year spot rate: [z1]% 1-year forward rates starting 1 year from today (t=1):• Node B: [f11b]%• Node C: [f11c]% 1-year forward rates starting 2 years from today (t=2):• Node D: [f21d]%• Node E: [f21e]%• Node F: [f21f]% Coupon rule (capped floater): Coupon at each node = min⁡( [short rate at that node]+s,  cap )\min\big(\,[\text{short rate at that node}] + s,\; \text{cap}\,\big) At maturity (t=3), the bond pays principal $100 plus the capped coupon.   Task:Using the lattice, estimate the price today by backward induction under equal risk-neutral branch probabilities (0.5). Discount each node’s expected cash flow by the local 1-year short rate at that node. Hint: The cap limits upside for investors, so the note should price below the uncapped floater (all else equal).  

Follow the guidelines listed below in order to open a blank Excel Spreadsheet. I wish you the best of luck! Once the spreadsheet opens, do not click on the refresh button. Doing so would erase your work. —- OPEN EXCEL SPREADSHEET: Click on the arrow next to either of the two files below. You may use this spreadsheet throughout the exam. Keep in mind the spreadsheet will NOT be saved when you submit your exam. Next, create a new sheet in the Respondus LockDown Browser spreadsheet. You can use this blank spreadsheet to calculate the answer. Make the column you are using as wide as possible. Otherwise, you might be seeing only the last decimals. Blank Spreadsheet-1.xlsx

You are working in the treasury department of a multinational energy company. The CFO is considering issuing new corporate bonds to lock in long-term funding, but wants to evaluate whether the firm would be better off rolling short-term debt instead. You are given the following annual spot rates (annual compounding): 1-year spot rate: [spot1] 2-year spot rate: [spot2] 3-year spot rate: [spot3] 4-year spot rate: [spot4] 5-year spot rate: [spot5] 6-year spot rate: [spot6] 7-year spot rate: [spot7] 8-year spot rate: [spot8]   The CFO turns to you and says: “We need to know the market’s view on future short-term borrowing costs. Find the [length]-year forward rate starting at year [start] so we can compare rolling loans against issuing longer-term debt today.”   What is the [length]-year forward rate starting at year [start]?   Round your answer to the nearest three decimals if needed. Type your answer in percentage and not in decimals (i.e. 5.2 and not 0.052). Do not type the % symbol.  

As the lender of last resort, the Federal Reserve makes emergency loans to stressed banks.

Which coil is used for a routine brain MRI?