You buy a TIPS at issue at par for $1,000. The bond has a [coupon]% coupon. Inflation turns out to be [i1]%, [i2]%, and [i3]% over the next 3 years. The total annual coupon income you will receive in year 3 is ______________. Please note this question refers to monetary (cash) income, not the rate. (i.e. $48.00) Please round to the nearest two decimals. Please do not include the $ symbol.

Fixed Income Trading: Dirty Price of a Bond An investment advisor is helping a client purchase a corporate bond in the secondary market. The bond pays coupons semiannually, and the seller is entitled to receive accrued interest for the portion of the coupon period that has already elapsed. The quoted price represents the clean price of the bond. To determine the amount that must actually be paid to acquire the bond, the investor must add accrued interest to the quoted price. Bond Input Value Face Value $1,000 Quoted (Clean) Price [quote] Annual Coupon Rate [coupon]% Days Since Last Coupon Payment [days] Days in Coupon Period 182 Question: What is the total amount that the investor should be willing to pay for the bond (i.e., the dirty price)? Remember that: Quoted price = Clean price Dirty price = Clean price + Accrued interest Assume semiannual coupon payments and 182 days between coupon payments. Round your answer to the nearest two decimals. Do not include the dollar sign.  

Fixed Income Risk: Modified Duration A fixed-income analyst is reviewing a semiannual coupon bond held in an institutional portfolio. The portfolio manager already understands the timing of the bond’s cash flows, but now wants to estimate the bond’s modified duration, which approximates the bond’s percentage price sensitivity to changes in yield. Bond Input Value Maturity [n] years Annual Coupon Rate [coupon]% Yield to Maturity [ytm]% Face Value $1,000 Coupon Frequency Semiannual Question: What is the bond’s modified duration? First compute Macaulay duration using the present value of the bond’s future cash flows. Then convert it to modified duration using the semiannual yield. Type your answer in years. Round to the nearest two decimals.

A corporate bond has a 10-year maturity and pays interest semiannually. The quoted coupon rate is 6%, and the bond is priced at par. The bond is callable in 5 years at 112% of par. What is the bond’s yield to call?

You buy a TIPS at issue at par for $1,000. The bond has a [coupon]% coupon. Inflation turns out to be [i1]%, [i2]%, [i3]%, and [i4]% over the next 4 years. The total annual coupon income you will receive in year 4 is ______________. Please note this question refers to monetary (cash) income, not the rate. (i.e. $48.00) Please round to the nearest two decimals. Please do not include the $ symbol.

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.