Click on the arrow next to the file below. Next, create a new sheet in the Respondus LockDown Browser spreadsheet. You can use this blank spreadsheet to calculate the answer. Make the column you are using as wide as possible. Otherwise, you might be seeing only the last decimals. Blank Spreadsheet-1-2.xlsx

Fixed Income Risk: Macaulay Duration A fixed-income analyst is reviewing a bond held in an institutional portfolio. The portfolio manager wants to estimate the bond’s Macaulay duration, which measures the weighted-average time to receive the bond’s promised cash flows. Bond Input Value Maturity [n] years Annual Coupon Rate [coupon]% Yield to Maturity [ytm]% Face Value $[face] Question: What is the bond’s Macaulay duration? Assume annual coupon payments. Type your answer in years. Round to the nearest two decimals.

A corporate bond has a 15-year maturity and pays interest semiannually. The quoted coupon rate is 6%, and the bond is priced at par. The bond is callable in 8 years at 112% of par. What is the bond’s yield to call?

[Chapter 25a – Basel I] A bank issues a $40 million financial guarantee/loan commitment that behaves similarly to a loan from a credit perspective, carrying a 100% credit conversion factor. The underlying counterparty is a private corporation. Calculate the Credit Equivalent Amount and the final Risk-Weighted Asset (RWA) value for this item. Risk Weight (%) Asset Category 0% Cash, gold bullion, claims on OECD governments 20% Claims on OECD banks and OECD public-sector entities 50% Uninsured residential mortgage loans 100% All other claims such as corporate bonds, non-OECD bank claims

[Chapter 11b – Types of VaR Measures] Scenario for Questions 54 to 60: A portfolio manager holds a two-asset portfolio with the following parameters: Asset 1 Value Weight: $200,000 Asset 1 Daily Volatility (Standard Deviation): 12% (or 0.12) Asset 2 Value Weight: $200,000 Asset 2 Daily Volatility (Standard Deviation): 18% (or 0.18) Correlation (Asset 1 & 2): 0.40 Confidence Level: 95% (corresponding to a Z-score of 1.645) Mean Expected Return: Assumed to be zero  Calculate the Incremental VaR for Asset 2 to find the exact drop in total portfolio risk if Asset 2 is entirely liquidated. 

[Chapter 25b & 26a – Basel II] Pillar 2 (Supervisory Review) specifies core principles for bank safety. According to Principle 3, what is the explicit responsibility of bank supervisors? 

[Chapter 26b – Basel III] What is the core structural mechanism and primary motivation for a bank to issue Contingent Convertible Bonds (CoCos) under the Basel III regulatory regime? 

[Chapter 11a – Basic VaR Calculation] A risk management system reports that the daily dollar VaR at a 10% significance level for a liquid commodities position is exactly $40,000. Assuming there are 5 business days in a week, 20 business days in a month, and 250 trading days in a standard year, what are the corresponding weekly and annual VaR measures for this asset? Reference Z-Table for Calculations: Significance Level (α) Confidence Level Critical Z-Value (zα​) 10% 90% -1.28 5% 95% -1.65 1% 99% -2.33

[Chapter 7] A securitized interest in a pool of assets is specifically referred to as a Collateralized Loan Obligation (CLO) when the underlying collateral pool comprises exclusively which type of asset? 

[Chapter 25a – Basel I] Why did regulators introduce the 1996 Amendment to the Basel I Accord?