Assume that you are a financial analyst in the fixed income department of an investment bank. You are given the following information: the 6-month, 12-month, 18-month, 24-month, and 30-month zero rates are, respectively, 4%, 4.2%, 4.4%, 4.6%, and 4.8% per annum, with continuous compounding. Your task is to answer the following questions.

1. Estimate the cash price of a bond with a face value of 100 that will mature in 30 months and pays a coupon of 4% per annum semiannually.
2. Calculate the yield rate of this bond.

Assume that you are a financial analyst in the fixed income department of an investment bank. You are given the following information: the 6-month, 12-month, 18-month, 24-month, and 30-month zero rates are, respectively, 4%, 4.2%, 4.4%, 4.6%, and 4.8% per annum, with continuous compounding. Your task is to answer the following questions.

1. Estimate the cash price of a bond with a face value of 100 that will mature in 30 months and pays a coupon of 4% per annum semiannually.
2. Calculate the yield rate of this bond.

Henry is planning to purchase a Treasury bond with a coupon rate of 1.69% and face value of $100. The maturity date of the bond is 15 May 2033.

(b) If Henry purchased this bond on 2 May 2018, what is his purchase price (rounded to four decimal places)? Assume a yield rate of 3.97% p.a. compounded half-yearly. Henry needs to pay 23.2% on coupon payment as tax payment and tax are paid immediately.

Select one:

a. 70.5649

b. 70.5665

c. 71.3047

d. 69.9169

Henry is planning to purchase a Treasury bond with a coupon rate of 3.02% and face value of $100. The maturity date of the bond is 15 May 2033. (b) If Henry purchased this bond on 3 May 2018, what is his purchase price (rounded to four decimal places)? Assume a yield rate of 2.39% p.a. compounded half-yearly. Henry needs to pay 21.8% on coupon payment as tax payment and tax are paid immediately.

Select one:

a. 100.7470

b. 100.7556

c. 99.5658

d. 100.7457

The renown experimental filmmaker James Incandenza has finally found a cure for boredom. His creation is known as the “The Entertainment.” Demand for The Entertainment in the United States is Qu = 100-P. Demand for The Entertainment in Canada is Qc = α100-P. The total cost of producing The Entertainment is C(Q) = 20Q. James Incandenza must decide whether to only sell The Entertainment in the United States or to sell it in both the United States and Canada. If James must charge the same price in both countries, what is smallest value of ↵ such that James will sell in both countries?

USE EXCEL ONLY AND SHOW FORMULAS PLEASE!

An office building is purchased with the following projected cash flows:

• NOI is expected to be $130,000 in year 1 with 5 percent annual increases.

• The purchase price of the property is $720,000.

• 100 percent equity financing is used to purchase the property.

• The property is sold at the end of year 4 for $860,000 with selling costs of 4 percent.

• The required unlevered rate of return is 14 percent.

a. Calculate the unlevered internal rate of return (IRR).

b. Calculate the unlevered net present value (NPV).

Consider a market where two firms sell an identical product to consumers and face the
following inverse demand function p = 100 - q1 - q2
but the firms face different marginal costs. Firm 1 has a constant marginal cost of MC1 = 10
and firrm 2 has a constant marginal cost of MC2 = 40.

a) What is firm 1s best response function?

b) What is firm 2's best response function?

c) What are the equilibrium quantities, price and profits for both firms?

Suppose some futures market has a notional $1 million deposited for 1 year as an underlying asset. Further suppose that the tick size is .01 and the tick value is $100.

1. How would you expect the contract price to be quoted? (1 point)
2. Why do you think the tick size and value were chosen to be those values? (2 point)
3. In your own words, give an example of how a company could use this market to hedge against an interest rate decrease. (2 points)