FMP

mayankmundhra30
Good Student
Posts: 23
Joined: Sat Jun 25, 2016 8:13 am

FMP

Postby mayankmundhra30 » Sun Sep 25, 2016 8:08 am

1) Compute the par rate of a 1 year $100 face value bond with semi-annual coupon payment and discount rates of 2.8% for six months and 3.7% for 12 months.
Choose one answer.
a. 3.82% Correct
b. 3.42% Incorrect
c. 2.62% Incorrect
d. 3.12% Incorrect

2) A and B enter into a fixed for floating swap for 10 years with semi-annual payments. Compute the discount factor for 1 year given the following fixed rate:
T6months: 4.0%
T12months: 4.8%
T18months: 5.6%
Choose one answer.
a. 1.96% Incorrect
b. 4.54% Correct
c. 2.87% Incorrect
d. 3.24% Incorrect

3) A US corporate bond is trading on NASDAQ with face value $ 1000, coupon rate of 6% and coupon dates 31-Dec and 30-Jun of every year. The bond matures on 31-Dec-2014 and today is 01-Oct-2013. Compute the dirty price of the bond if yield is 8%.
Choose one answer.
a. $987.62 Incorrect
b. $989.87 Incorrect
c. $982.79 Correct
d. $992.67 Incorrect

4) Compute the discount factor for a 6% $1000 face value bond currently trading at $1025 with a maturity of 6 months.
Choose one answer.
a. 0.9863 Incorrect
b. 0.9952 Correct
c. 0.9788 Incorrect
d. 0.9967 Incorrect

Please tell me how to solve the above problems. Kindly reply.

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

Re: FMP

Postby edupristine » Mon Sep 26, 2016 6:43 am

Hi Mayank

Solution for 2nd Question
D(Discount factor)= 100/(100+P)^n
= 100/(100+4/2)^1 (4/2 because payment is semi-annual )
=0.9804
=100%-98.04%
=1.96%
Discount rate for 12 months= 100/ {[100+(4.8/2)]^1 + [(4.8/2)/ (1+1.96%)]} (for the d of 1st six months and next six months period of the)
= 0.9546
=100%-95.46%
=4.54%

mayankmundhra30
Good Student
Posts: 23
Joined: Sat Jun 25, 2016 8:13 am

Re: FMP

Postby mayankmundhra30 » Mon Sep 26, 2016 1:46 pm

What about the solution of the other problems?


Return to “FRM Part I”



cron

Disclaimer

Global Association of Risk Professionals, Inc. (GARP®) does not endorse, promote, review or warrant the accuracy of the products or services offered by EduPristine for FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to EduPristine nor is GARP® responsible for any fees or costs of any person or entity providing any services to EduPristine Study Program. FRM®, GARP® and Global Association of Risk Professionals®, are trademarks owned by the Global Association of Risk Professionals, Inc

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by EduPristine. CFA Institute, CFA®, Claritas® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Utmost care has been taken to ensure that there is no copyright violation or infringement in any of our content. Still, in case you feel that there is any copyright violation of any kind please send a mail to abuse@edupristine.com and we will rectify it.