## FMP

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

### FMP

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.
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%
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%.
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.
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

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

What about the solution of the other problems?