Question

As a financial analyst at Bank of America Merrill Lynch, you
want to find out how the credit risks impact the yield to maturity
on a bond. A 12% bond maturing in three years is priced at 85% of
the face value. Suppose that there is a 20% chance that at maturity
the bond will default and you will receive only $400 payment.

a. What is the bond’s promised yield to
maturity? (sample answer: 15.50%)

b. What is its expected yield to maturity?

Answer #1

a)

b)

As a financial analyst at Bank of America Merrill Lynch,
you want to find out how the credit risks impact the yield to
maturity on a bond. A 12% bond maturing in three years is priced at
85% of the face value. Suppose that there is a 20% chance that at
maturity the bond will default and you will receive only $400
payment.
a. What is the bond’s promised yield to
maturity?
(sample answer: 15.50%)
b. What is its expected...

As a financial analyst at Bank of America Merrill Lynch, you
want to find out how the credit risks impact the yield to maturity
on a bond. A 12% bond maturing in three years is priced at 85% of
the face value. Suppose that there is a 20% chance that at maturity
the bond will default and you will receive only $400 payment.
a. What is the bond’s promised yield to
maturity? (sample answer: 15.50%)
b. What is its expected yield...

As a financial analyst at Bank of America Merrill Lynch, you
want to find out how the credit risks impact the yield to maturity
on a bond. A 12% bond maturing in three years is priced at 85% of
the face value. Suppose that there is a 20% chance that at maturity
the bond will default and you will receive only $400 payment.
a. What is the bond’s promised yield to
maturity? (sample answer: 15.50%)
b. What is its expected yield...

As a financial analyst at Bank of America Merrill Lynch, you
want to find out how the credit risks impact the yield to maturity
on a bond. A 12% bond maturing in three years is priced at 85% of
the face value. Suppose that there is a 20% chance that at maturity
the bond will default and you will receive only $400 payment.
a. What is the bond’s promised yield to
maturity? (sample answer: 15.50%)
b. What is its expected yield...

As a portfolio manager for Bank of America Merrill Lynch, you
are managing a portfolio of $48.50 million. You would like to
estimate how much your portfolio might be losing over the next 9
trading days. Suppose the portfolio has a daily volatility of
2.5%.
a. What is 9 day volatility? (sample answer: 15.50% or
0.1550)
b. What is the VaR (in dollars) over a 9 day time period at a 95%
confidence level?

As a portfolio manager for Bank of America Merrill
Lynch, you are managing a portfolio of $48.50 million. You would
like to estimate how much your portfolio might be losing over the
next 9 trading days. Suppose the portfolio has a daily volatility
of 2.5%.
a. What is 9 day volatility?
(sample answer: 15.50% or 0.1550)
b. What is the VaR (in dollars) over a 9 day time period
at a 95% confidence level?
(Sample answer: $2.5 million; or
$2,500,000.0)

Assume that you are a financial analyst in the fixed income
department of an investment bank. You are given the following
information: the 6-month, 12-month, 18-month, 24-month, and
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a. $1,736.22
b. $1255.29
c. $1450.87
d. $1,373.92
e. None of the above
9. Your uncle has $375,000 and wants to retire. He expects to
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How much could he withdraw...

1) An investor buys a 10-year bond with a 7.5% coupon rate paid
annually. The bond with a YTM of 6%, is purchased at a price of
$111.040 per $100 of par value. Assuming a 25bp change in the YTM,
the bond’s approximate modified duration is closest to: a) a) 7.100
years
b) 7.450 years
c) 7.253 years
2) As a corporate bond analyst, you see a 10-year newly bond
issued by Apple trading at a spread to Treasuries of...

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