The six-month interest rate is 3%. The three-month rate is also 3%. What is the forward 3-month rate in three months? Be mindful of day counts. 3 points

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2.What is the price of a 20-year, semi-annual coupon 4% bond with a yield-to-maturity of 4.4%? 3 points

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3.An extension to Question 2, what is its current yield? 2 points

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4.You purchase a twenty year zero coupon bond with a yield of 5%. One year later you sell the bond at a yield of 4.5%. What is your rate-of-return? 3 points

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5.You purchase a twenty year, 5% coupon bond with a yield of 5%. One year later you sell the bond at a yield of 4.5%. What is your rate-of-return? 3 points

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6.Calculate the price and duration of a three-year, annual 5% coupon bond, face value 100, at a 5.1% yield. 4 points

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7.An extension to Question 5, Calculate the bond's dv01 and use that to estimate the effect of a half percent increase in yield on the bond's price. 3 points

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8.Bond A is priced at par with a duration of 6.5 years and yielding 4%. Bond B is priced at 99, has a duration of 12 years and yields 4.4%. You own A. How many of B do you need to sell short in order for your position to be insensitive to (relatively small) changes in interest rates? 3 points

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9.EACH OF THE FOLLOWING MULTIPLE CHOICE QUESTIONS IS WORTH 3 POINTS, EXCEPT WHERE OTHERWISE NOTED

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Answer rating: 100% (QA)

The forward 3month rate in three months is 3 This is because the sixmonth interest rate and the threemonth rate are both 3 indicating a flat yield curve Therefore the forward rate which is the expecte... View the full answer