a) Answer both subquestions: i. What is the annual payment on a 200,000 mortgage repayable in...

 

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a) Answer both subquestions: i. What is the annual payment on a 200,000 mortgage repayable in 30 years with equal monthly instalments, and an annual interest rate of 3%? [20%] ii. A 2,000,000 certificate of deposit was issued at par with a coupon of 8% and 91 days to maturity. It is currently yielding 8.5% with 60 days to maturity. What is the current price of this certificate of deposit? [20%] b) A customer wants to buy a 50m against dollars 6-month forward from a bank. The 6-month sterling interest rate is 4%, the 6 month dollar interest rate is 3%. The spot bid rate is 1.3110 $/, while the spot ask/offer is 1.3132 $/. Calculate the 6-months forward exchange rate on the assumption that the covered interest rate parity holds. [20%] c) The (annual) spot-rate yield curve for maturities up to 2 years, given on a semi-annual basis, is listed in the following table: Maturity (years) 0.5 1 1.5 2 Spot rate 3% 3.1% 3.2% 3.5% Use the above spot rates to price a bond with annual coupons of 5 paid semi-annually with maturity of 2 years and par value of 100. [20%] d) On 10.09.2017, an investor buys a 91 day certificate of deposit with a face value of 1000, an interest rate of 6%, 61 days to maturity and a yield of 6.8%. What is the clean price paid by the investor for this security? [20%] a) Answer both subquestions: i. What is the annual payment on a 200,000 mortgage repayable in 30 years with equal monthly instalments, and an annual interest rate of 3%? [20%] ii. A 2,000,000 certificate of deposit was issued at par with a coupon of 8% and 91 days to maturity. It is currently yielding 8.5% with 60 days to maturity. What is the current price of this certificate of deposit? [20%] b) A customer wants to buy a 50m against dollars 6-month forward from a bank. The 6-month sterling interest rate is 4%, the 6 month dollar interest rate is 3%. The spot bid rate is 1.3110 $/, while the spot ask/offer is 1.3132 $/. Calculate the 6-months forward exchange rate on the assumption that the covered interest rate parity holds. [20%] c) The (annual) spot-rate yield curve for maturities up to 2 years, given on a semi-annual basis, is listed in the following table: Maturity (years) 0.5 1 1.5 2 Spot rate 3% 3.1% 3.2% 3.5% Use the above spot rates to price a bond with annual coupons of 5 paid semi-annually with maturity of 2 years and par value of 100. [20%] d) On 10.09.2017, an investor buys a 91 day certificate of deposit with a face value of 1000, an interest rate of 6%, 61 days to maturity and a yield of 6.8%. What is the clean price paid by the investor for this security? [20%]