Orange County Case : Use the details provided in class notes and the erisk.com case study for background.

(A) Suppose that the $7.5 billion portfolio was not leveraged, and simply invested in zero coupon bonds, with identical maturity T. Find T that would justify the losses suffered ($1.6 billion), given an increase in (short term) interest rates of 2.7% (from 3% to 5.7%) using a) Duration approximation for price change

(B) Bob Citron used the Repo Market to leverage up his position from $7.5 billion to a total portfolio value of about $20.5 billion. (i) Explain how such operation would work in practice (provide an example).

(C) A large portion of the total portfolio was invested in securities similar to inverse floaters. Inverse floaters are securities with coupon payments that are inversely related to a reference floating rate. Assume for simplicity that a fraction x of the $20.5 billion portfolio was invested in 1-year T-bills, and the other (1 ? x) was invested in inverse floaters, with annual coupon payments c (t) = 15% ? rTBill (t ? 1), and exactly 3-years to maturity. Assume for simplicity that rTBill (t ? 1)

(i) Generically speaking, how can we compute the duration of an inverse floater? Is it positive or negative? (no calculations)

(ii) Suppose the 1,2, and 3 year term structure of interest rates on Dec 31, 1993 were 3.64%, 4.20% and 4.46% respectively. The corresponding discount factors are 0.9642, 0.9193, 0.8747 respectively (continuous compounding). What is the duration of the inverse floater? (calculations needed)

(iii) Using the duration of the inverse floater from (ii) and the duration of the entire portfolio from part (B) find x.

(D) Convexity: Consider the portfolio in part (C). What is its convexity with respect to current interest rate? (Note that just as duration, the convexity of a portfolio is the value weighted sum of convexities of individual securities).

Part II. Molar Enthalpy of Dissolution of a Salt Mass of water 75.41g Mass of NH.NO, 3.02 19.2"C3. (9 points) Using your data from Part II, calculate the molar heat of dissolution of NH.NO, in kJ/mol. Calculate the % error compared to the value you obtained in question 2. Assume the specific heat of the solution is the same as pure water, 4.184 J/g C. Show work. 63. Preformulation studies In new drug discoveries and in generic drug formulation: Definition and explanation of preformulation, the tools and methods used in preformulation. Compatibility tests, polymorphism in drug crystals, solubility, dissolution, intrinsig dissolution, stability, solid state stability.Use the following information to answer the next question. A saturated solution of silver chromate is prepared by adding excess of the compound to the solution. 15. Which of the following statements is always true for such a solution? A. The Ag+ is equal to the [Ag2 Cro4]. B. The Cro,2- ]is twice as much as the [ Ag*]. C. The rate of crystallization equals the rate of dissolution. D. The rate of crystallization is greater than the rate of dissolution.D Question 8 1 pts If the financial distress is temporary, it is called technical insolvency. If it is a permanent problem, it is called insolvency in bankruptcy. O True O False D Question 9 1 pts In U.S. bankruptcy law, Chapter 7 deals with business reorganization guidelines and Chapter 11 deals with liquidation procedures. O True O False