Yield Curve on May 15, 2000 Maturity Yield Maturity Yield Maturity Yield 0.25 6.33% 2.75 6.86% 5.25 6.39% 0.50 6.49% 3.00 6.83% 5.50 6.31% 0.75 6.62% 3.25 6.80% 5.75 6.24% 1.00 6.71% 3.50 6.76% 6.00 6.15% 1.25 6.79% 3.75 6.72% 6.25 6.05% 1.50 6.84% 4.00 6.67% 6.50 5.94% 1.75 6.87% 4.25 6.62% 6.75 5.81% 2.00 6.88% 4.50 6.57% 7.00 5.67% 2.25 6.89% 4.75 6.51% 7.25 5.50% 2.50 6.88% 5.00 6.45% 7.50 5.31% Notes: Yields are calculated based on data from CRSP. 3. On May 15, 2000 the semi-annually compounded yield curve was as in the above Table. Calculate the convexity for the following securities: (a) 4-year zero coupon bond (b) 2-year coupon bond paying 3% quarterly

Yield Curve on May 15, 2000 Maturity Yield Maturity Yield Maturity Yield 0.25 6.33% 2.75 6.86% 5.25 6.39% 0.50 6.49% 3.00 6.83% 5.50 6.31% 0.75 6.62% 3.25 6.80% 5.75 6.24% 1.00 6.71% 3.50 6.76% 6.00 6.15% 1.25 6.79% 3.75 6.72% 6.25 6.05% 1.50 6.84% 4.00 6.67% 6.50 5.94% 1.75 6.87% 4.25 6.62% 6.75 5.81% 2.00 6.88% 4.50 6.57% 7.00 5.67% 2.25 6.89% 4.75 6.51% 7.25 5.50% 2.50 6.88% 5.00 6.45% 7.50 5.31% Notes: Yields are calculated based on data from CRSP. 3. On May 15, 2000 the semi-annually compounded yield curve was as in the above Table. Calculate the convexity for the following securities: (a) 4-year zero coupon bond (b) 2-year coupon bond paying 3% quarterly

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Table 3.6 Yield Curve on May 15, 2000 2/2 ield Maturity Yield Maturity Yield 0.25 6.33% 2.75 6.86% 5.25 6.39% 0.50 6.49% 3.00 6.83% 5.50 6.31% 0.75 6.62% 3.25 6.80% 5.75 6.24% 1.00 6.71% 3.50 6.76% 6.00 6.15% 1.25 6.79% 3.75 6.72% 6.25 6.05% 1.50 6.84% 4.00 6.67% 6.50 5.94% 1.75 6.87% 4.25 6.62% 6.75 5.81% 2.00 6.88% 4.50 6.57% 7.00 5.67% 2.25 6.89% 4.75 6.51% 7.25 5.50% 2.50 6.88% 5.00 6.45% 7.50 5.31% Notes: Yields are calculated based on data from CRSP (Daily Treasuries). 3. (40 points) Today is May 15, 2000, and the current, semi-annually compounded yield curve is in Table 3.6. Compute the duration for the following securities: (a) 3-year zero coupon bond; (b) 3 1/4-year coupon bond paying 6% semiannually; (c) 1-year coupon bond paying 4% quarterly; (d) 6-year floating rate bond with a zero spread, paying semiannually; (e) 3-year floating rate bond with a 35 basis point spread, paid semiannually; (f) 4 1/4 year floating rate bond with 50 basis point spread, paid semiannually 4. (20…
Market Data Return Standard Deviation Beta Market Data 0.120 0.200 1.000 Risk-Free Rate 0.025 0.000 0.000 Company Data A B C Alpha 0.015 0.020 -0.005 Beta 1.200 0.800 1.250 Residual standard deviation, σ(e) 0.105 0.195 0.067 Standard Deviation of Excess Return 0.245 0.235 0.210 Required: Using the data above, please solve for the Sharpe Ratio, Treynor's Measure, and Information Ratio.
Market Data Return Standard Deviation Beta Market Data 0.120 0.200 1.000 Risk-Free Rate 0.025 0.000 0.000 Company Data A B C Alpha 0.015 0.020 -0.005 Beta 1.200 0.800 1.250 Residual standard deviation, σ(e) 0.105 0.195 0.067 Standard Deviation of Excess Return 0.245 0.235 0.210 Required: Using the data above, please solve for the Sharpe Ratio, Treynor's Measure, and Information Ratio. (Use cells A3 to D10 from the given information to complete this question. Negative answers should be input and displayed as a negative values. All other answers should be input and displayed as positive values.) Risk-Adjusted Performance Measures A B C Market Sharpe Ratio Treynor's Measure Information Ratio
rive What is the expected return of the following investment? Actual Return Probability 35% 10% 40% 15% -8% 5% 15% 30% 5.3% 8.2% 18.3% 22.6%
How much would be needed today to provide an annual amount of $50000 each year for 20 years, at 9% interest each year? a. $546,000 O b. $456,427 O c. $645,000 O d. $456,000
State of the Economy Probability Market Return Investment ReturnExpansion 0.30 40% 60%Normal 0.50 10% 25%Recession 0.20 -15% -40% Compute the correlation between the market the investment return(s)
Qs Let the selling Price of a product is 200$ and the variable cost is 120$ and the Fixed Cost is 120008 find: . Quantity of Break Even Point. . Break Even Point Revenues in dollar. . The number of product if the operating profitis 24000 a b. c d. The sale value if the expected profit 8000$. = 5=
State of the Economy Probability Market Return Investment ReturnExpansion 0.30 40% 60%Normal 0.50 10% 25%Recession 0.20 -15% -40% Compute the beta of the investment
A hedge fund has created a portfolio using just two stocks. It has shorted $35,000,000 worth of Oracle stock and has purchased $85,000,000 of Intel stock. The correlation between Oracle's and Intel's returns is 0.65. The expected returns and standard deviations of the two stocks are given in the following table: a. What is the expected return of the hedge fund's portfolio? b. What is the standard deviation of the hedge fund's portfolio? a. What is the expected return of the hedge fund's portfolio? The expected return of the hedge fund's portfolio is %. (Round to two decimal places.) C
Yields Year TLS DI PFE WMT 20x5 12.00% 4.50% 5.80% 11.30% 20x6 13.30% 5.30% 5.70% 9.00% 20x7 10.20% 3.10% 5.90% 13.90% 20x8 9.30% 2.70% 4.50% 14.80% 20x9 8.60% 1.90% 6.30% 15.00% Correlations: CPP = Perfect positive correlation, CP = Perfect correlation, SC = No correlation, CN =Negative correlation, CPN = Perfect negative correlation TLS – DI= 0.996145099 = (CPP) DI – PFE= 0.005359947 = (SC) TLS – PFE= 0.08450695 = (CP) DI – WMT= -0.975050934 = (CPN) TLS – WMT= -0.986408221 = (CPN) PFE – WMT= -0.144303856 = (CN) b. Which three of the four stocks would you combine to build a diversified portfolio and why? It starts from the premise that there is an investment distribution in equal parts (33.3%) among the selected shares. c. Calculate the return, risk and coefficient of variation for the portfolio of three stocks selected in the previous exercise. It starts from the premise that there is an…
Suppose Johnson & Johnson and Walgreen Boots Alliance have expected returns and volatilities shown here,, with a correlation of 22%. Assume the portfolio is equally invested in these two stocks. If the correlation between Johnson & Johnson's and Walgreens' stock were to increase, a. Would the expected return of the portfolio rise or fall? b. Would the volatility of the portfolio rise or fall? a. Would the expected return of the portfolio rise or fall? (Select the best choice below.) O A. Remain the same. OB. Fall. O C. Cannot tell from the information provided. OD. Rise.
Exhibit 7.1USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM Rates of Return Year RA Computer Market Index 1 13 17 2 9 15 3 –11 6 4 10 8 5 11 10 6 6 12 Refer to Exhibit 7.1. The equation of the characteristic line for RA is a. RRA = –7.98 + 1.1023RMI. b. RRA = –9.41 + 1.3893RMI. c. RRA = –4.92 – 0.7715RMI. d. RRA = 11.63 + 1.2195RMI. e. RRA = 4.92 + 0.7715RMI.

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