FINA 4400 Fall 2017 Final Exam Day Section Copy D 11. A ten year inflation index

Question

FINA 4400 Fall 2017 Final Exam Day Section Copy D 11. A ten year inflation indexed Treasury note has a 3.75 per cent coupon and $ 100 par value. The consumer price index at origination was 130: The consumer price index for the next coupon is 140. What is the dollar amount of the next coupon? a. Not more than $ 1.90 b. More than $ 1.90, but not more than $ 1.95 c. More than $ 1.95 but not more than $ 2.00 d. More than $ 2.00 12. In 1928 the Federal Reserve Bank of New York conducts an open market purchase in response to a gold inflow from the Bank of England. How might we characterize this decision? a. The FRBNY is "sterilizing" the gold inflow, which is harmful to the BOE b. The FRBNY is engaging in an expansionary policy, which is helpful to the BOE c. The actions of the FRBNY are neutral with respect to the BOE. d. We need additional information to answer the question. 13. Which of the Federal Reserve Bank Presidents is automatically chairman of the FOMC? a. Federal Reserve Bank Presidents cannot be chairman of the FOMC. b. The president of the Federal Reserve Bank of Boston. c. The president of the Federal Reserve Bank of Chicago. d. The president of the Federal Reserve Bank of New York 14. The 1 year Treasury Bill yield is 8 per cent. The one year forward rate, one year from now, is eight per cent. If there are no liquidity premiums, what is the bond market prediction for the 1 year Treasury Bill yield, 1 year from now? a. It will exceed eight per cent. b. It will be exactly eight per cent. c. It will be less than eight per cent d. We need additional information to answer the question. will have 15. If two bonds have the same yield to maturity, and the same duration, which the greater price risk? a. The one with the lower coupon. b. The one with the longer maturity. c. The one with the lower coupon or the one with the longer maturity. d. They will have about the same price risk.

Explanation / Answer

Answer for 11.

Inflation index bond Coupon rate 3.75% Par value 100 $ Original Index 130 New Index 140 Change 10 Basis points Inflation Rate (10*100/130) 7.69 % Inflation Accrual 7.69 % Inflation adjusted par value = (1+7.69%)*100 107.6923 $ Par value 107.6923 $ Coupon rate 3.75% Payment (3.75% x par value (107.693$) 4.038462 $ , Answer D

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.