Duration Calculations:  You own an annual (one payment per year) bond that pays a coupon of 6%, and matures in three years.  The current yield to maturity on this bond is 8% and it has a par value of $1,000. 

Consider the following $1,000 par value zero-coupon bonds issued by the same company:            Bond           Years to Maturity      Yield to Maturity              A                          1                                6.00%              B                          2                                7.50%              C                          3                                7.99%              D                          4                               8.49%              E                          5                                8.60%   You just purchased a bond from the same company that pays a 4% annual coupon and matures in 5 years.  As shown in the table, the current required yield to maturity on this bond is 8.6%. 

Formulas for Exam One   Forward Spot Rate = (1+YTMn)n /(1+YTMn-1)n-1 -1   NAV = (MVassets – Liabilities) / Shares Out   Bond Price = PMT1/(1+YTM)1 + PMT2/(1+YTM)2 +…..PMTn/(1+YTM)n + FV/(1+YTM)n   ΔP/P = -D[ΔY/(1+Y)]   Duration of Perpetuity = (1+Y)/Y   Current Margin = (MV – amount borrowed) / MV   MC = $borrowed / [(1 – Margin) X #Shares]   Short Margin = (Initial cash – MV of Shares) / MV of shares   Short MC = Initial cash position / [(1+Margin) X #Shares]

An investor purchases one municipal bond that pays a rate of return of 8%, and one corporate bond that pay a rate of return of 10%.  If the investor is in the 25% tax bracket, his after tax rates of return on the municipal and corporate bonds would be respectively

You own a semi-annual bond that will mature in 8 years, but is callable in three years with a penalty of $50.  The coupon rate is 5%, and it has a face value of $1,000.  If it is currently selling for $1,085, what is the yield to call on this bond?

Investors who wish to liquidate their holdings in a closed-end fund may ___________________.

What is the duration of this bond? 

You short-sell 200 shares of Tuckerton Trading Co., now selling for $52.50 per share.  You also place a stop-buy order at $60. What is your maximum possible loss?

A __________ represents an ownership share in a corporation.

Assume that you have just purchased some shares in an investment company reporting $300 million in assets, $30 million in liabilities, and 30 million shares outstanding. What is the Net Asset Value (NAV) of these shares?