FINA 4400 Fall 2017 Final Exam Day Section CopyD 16. The 1 year Treasury Bill yi
ID: 2804065 • Letter: F
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FINA 4400 Fall 2017 Final Exam Day Section CopyD 16. The 1 year Treasury Bill yield is 8 per cent. The bond market expects that the 1 year Treasury Bill yield, one year from now, will be eight per cent. If there are posit liquidity premiums, what is the one year forward rate, one year from n now? a. Greater than eight per cent b. Exactly eight per cent. c. Less than eight per cent. d. We need additional information to answer the question. 17. A 10 year inflation indexed bond has a four per cent coupon. The CPI at issue was 100. The CPI for the next coupon is 95. What is the dollar amount of par value returned at maturity? a. $ 2 b. $2 x (100/95) c. $2 x (95/100) d. We don't know because we don't have the CPI number for the maturity of the bond. 18. Your portfolio has a yield of 5 per cent. When the yield rises by 0.105%, the value of your portfolio rises by 1.00 %. what is the duration of your portfolio? a. There is no way to answer the question, because what is described in the question can never happen. b. The duration is 1/10 of a year. c. The duration is 1 year. d. The duration is 10 years. 19. William Isaac was chair of the FDIC during the failure of the Penn Square and Continental Illinois banks. What is the title of his book on the recent financial crisis? a. Senseless Panic b. The Big Short c. Lords of Finance: the bankers who broke the world. d. The Best Way to Rob a Bank is to Own One 20. What was sterilization during the 1925-1931 gold standard? a. Open market purchases to offset a gold inflow. b. Open market purchases to offset a gold outflow. c. Open market sales to offset a gold inflow. d. Open market sales to offset a gold outflow.Explanation / Answer
16)option A, since the liquidity premium is positive it will higher than 8%
17)option D
18)Option A since yield and prices are inversely proportional
19)option A
20)option B
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