Practice 1 Module 2: Financial Instruments Assignment: Answer the following questions. Due by 11:59 P.M. CT, September 1, 2022. For questions 1-4, fill in the blank. Be specific. Do not use an acronym. 1) A form of short-term lending involving the purchase of government securities with a promise to sell them back is called 2) There are two types of international bonds. One of them is a which is denominated in a currency other than that of the country in which it is issued. 3) Treasury bills are short-term debt financing instruments of the US Federal government and issued at a from the face value. 4) An investor can make choice between tax-exempt bonds and taxable bonds by comparing of tax-exempt bond with the before-tax return on taxable bond. For questions 5-10, show all work including all necessary eguations with the proper inputs identified. Set your calculator at 6 (six) decimal places (How? Texas Instrument BA 11 PLUS: [2ND] FORMAT 6 [ENTERD and provide your answers up to two decimal places. Using the quotations and information below, answer the following questions 5 7. Suppose that you are an investor (not a dealer) in Treasury securities and you can trade Treasury securities at the prices/yields quoted on the Wall Street Journal Market Data Center. The Wall Street Journal Market Data Center (http://online.wsj.com/mdc/public/page/2 3020treasury.html?mod=mdc bnd_pglnk) Treasury Bills Number of Days to Bid Asked Chg Asked Maturity yield 92 0.550 0.540 -0.30 0.548 Treasury Bonds Maturity Coupon Bid Asked Chg Asked yield 5/15/2048 7.250 129.7188 129.7656 0.2031 0.769 5) You want to purchase the Treasury bill with the yield quotation above. How much would you have to pay? Assume that the face value of T-bill is $1,000. FIN 470(G) (Investments) Practice 1: Financial Instruments, 1 6) You hold the Treasury bond maturing on May 15, 2048. If you Q them, how much do you expect to receive from this sale? Assume the par value is $1,000. 7) Compute the semiannual interest payment from the Treasury bond that matures in May 15, 2048. Assume the par value is $1,000. Using the information below, answer the following questions 8 9. The municipal bond currently offers yield of 8%, while a comparable taxable corporate bond pays 10% beforetax yield. 8) If you are in the tax bracket of 10%, (a) what is the after-tax yield on the taxable corporate bonds? (b) Which one gives you the hi her a ertax ield? 9) If you are in the tax bracket of 30%, (a) what is the eguivalent taxable yield of the municipal bond? (b) Based on your answer in part (a), which one would you prefer, a taxable corporate bond or a municipal bond? Why? 10) The coupon rate on a tax-exempt bond is 6.46%, and the rate on a taxable bond is 8.5%. Both bonds sell at par. What is the tax bracket (marginal tax rate) at which an investor would be indifferent between the two bonds. FIN 470(G) (Investments) Practice 1: Financial Instruments, 2