Answer the following questions. Each correct answer is 20 points. 1. Explain why the government in the US decided to restrict competition in financial intermediation and how this helps the stability of the financial system. 2. Consider a bond with a 7.5% annual coupon rate and a face value of 1,000. Calculate the bond price and duration & show your work Interest rate Bond Pleduration Maturity Years to + 5 6 What relationship do you observe between yield to maturity and the current market value? What is the relationship between YTM and duration? 3. Using the approximate formula for YTM, find the approximate yield to maturity for the following bond with 5% coupon rate if the market price is given in the table. Show your work Years to Face value Bend PriceApprox. YTM Maturity 1500 1000 1250 1000 1000 1000 + 4. Estimate the yield to maturity and yield on a discount basis of a 1-year coupon bond in the following table (show your work): Bead Price Face Value YTMYield db 4000 4500 5000 2900 4850 3500 8100 s. Consider an investment manager who holds the following Bond Portfolio with Bond A, and Bond B. Each bond has a face value of S1000 and the market interest rate is 10% Fill in the Market price of each bond. Then find the total portfolio value. Fill in the weights column, find the duration of each bond, and compute the Duration of the bond portfolio Maturit Market DUR Weights Hell Value (5) Coupe Price Mark ct d 1 Rate (5) 10% 5 years 17.500 B 15% 5,000 DO ya Total Answer the following questions. Each correct answer is 20 points. 1. Explain why the government in the US decided to restrict competition in financial intermediation and how this helps the stability of the financial system. 2. Consider a bond with a 7.5% annual coupon rate and a face value of 1,000. Calculate the bond price and duration & show your work Interest rate Bond Pleduration Maturity Years to + 5 6 What relationship do you observe between yield to maturity and the current market value? What is the relationship between YTM and duration? 3. Using the approximate formula for YTM, find the approximate yield to maturity for the following bond with 5% coupon rate if the market price is given in the table. Show your work Years to Face value Bend PriceApprox. YTM Maturity 1500 1000 1250 1000 1000 1000 + 4. Estimate the yield to maturity and yield on a discount basis of a 1-year coupon bond in the following table (show your work): Bead Price Face Value YTMYield db 4000 4500 5000 2900 4850 3500 8100 s. Consider an investment manager who holds the following Bond Portfolio with Bond A, and Bond B. Each bond has a face value of S1000 and the market interest rate is 10% Fill in the Market price of each bond. Then find the total portfolio value. Fill in the weights column, find the duration of each bond, and compute the Duration of the bond portfolio Maturit Market DUR Weights Hell Value (5) Coupe Price Mark ct d 1 Rate (5) 10% 5 years 17.500 B 15% 5,000 DO ya Total