A trader bought a 10 year T note futures at 128'13 and sold it at 109'25.  how much is his profit?  Keep your answer to two decimal places.

1. Suppose that 6-month, 12-month, 18-month, and 24-month zero rates continuously compounded are 0.03, 0.01,0.04,and 0.03 per annum, respectively.  Estimate the cash price of a bond with a face value of $1000 that will mature in 24 months pays a coupon of $61 per annum semiannually.  Please write down the numerical answer with two decimal points and no dollar sign.
2. The two-year zero rate is 0.029 and the three year zero rate is 0.045. What is the forward rate for the third year? All rates are continuously compounded. Write the answer in decimal format and keep 2 decimal points.
3. A portfolio is worth $943,141 and has a duration of 5.88 years.  The futures price for a June Treasury note futures contract is 113 and each contract is for the delivery of bonds with a face value of 100,000. On the delivery date the duration of the cheapest to deliver bond is 3.27 years.  To hedge the interest rate risk, how many  June T note futures do you have to enter short positions on?
4. a September Eurodollar Futures is quotes as 97.8, so the implied annualized 3 month interest rate starting in September is     %.
5. Citibank need to borrow $1 million for 6 months  starting in 1 years.  Citibank is concerned about the interest rate would like to lock in the interest rate it pays by going long an FRA with Bank of America.  The FRA specifies that Citibank will borrow at a fixed rate of 0.01 for 6 months on $1 million in 1 years. If the  6 months LIBOR rate proves to be 0.04. Then to settle the FRA, what is the cash flow to Citibank at the end of 1 years?  Please be careful with the sign (positive/negative)  of your answer and keep your answer to 2 decimal points.
6. A two year coupon bond with a yield of 0.13 (continuously compounded) pays an 5.3% coupon at the end of each year.  Face value is $1000.  Calculate the duration of the bond.
7. Companies X and Y have been offered the following rates per annum on a $5 million 10 year loan: ( 14 pts )

 

	Fixed	Floating
X4	4%	6-month LIBOR +0.5%
Y	4.5%	6 month LIBOR +1.5%

 

Company X requires a floating-rate loan; company Y requires a fixed - rate loan.

 

1. Design a swap that will reduce the borrowing costs for both companies and will appear equally attractive to both companies. The swap should only involve the two companies. Please draw the cash flows and identify the rate on each cash flow. Please show how you get the swap rate.
2. Design a swap that will involve a bank, acting as intermediary, and will net the bank 0.3% per annum and will appear equally attractive to X and Y.

Answer rating: 100% (QA)

Question 1 The profit from buying a 10year Tnote future at 12813 and selling it at 10925 is Profit 10925 12813 x 1000 18750 Question 2 The cash price ... View the full answer