(a) A Bank has a bond with a maturity of 4 years. The coupon rate of...
(a) A Bank has a bond with a maturity of 4 years. The coupon rate of the bond is 8%, the yield to maturity is 9%, and the face value is 1 million dollars. Interest payment will be paid annually. Determine the price (present value) and duration of the bond. (9 marks)
(b) Predict the change in the bond price if interest rates rise by 100 basis points based on the duration of the bond that you have calculated in part (a). (5 marks)
(c) Calculate the leverage adjusted duration gap (DGAP) if the ratio of total equity to total asset is 0.14, and the duration of all its liabilities is 1.88. (Assume that the Bank holds the bond in part (a) as its only asset) (5 marks)
(d) It is expected that the market interest rate will increase in the future. Assume that the ratio of total equity to total asset, and the duration of all the liabilities are both fixed, compute a new value of duration of all the assets so that immunization can be carried out. (4 marks)
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(a) A Bank has a bond with a maturity of 4 years. The coupon
rate of...
Question 1 (14 marks) (a) Identify and explain briefly three components of a good organizational structure...
Question 1 (14 marks) (a) Identify and explain briefly three components of a good organizational structure in managing operational risk according to the Hong Kong Monetary Authority's Supervisory Policy Manual OR-1. (8 marks) (b) Identify and explain briefly the three stages of money laundering (6 marks) Question 2 (23 marks) (a) A Bank has a bond with a maturity of 4 years. The coupon rate of the bond is 8%, the yield to maturity is 9%, and the face value...
Bank 2 Rate Sensative Fixed Rate Non Earning Assets Yield 600 250 150 Liabilities Rate 600...
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a. An investor buys a 5 % annual coupon payment bond with three years to maturity....
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A fixed coupon bond with 4 years until maturity has a coupon rate of 5% paid...
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Consider a bond that has a 30-year maturity, an 8% coupon rate, and sells at an...
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Bank 2 Rate Sensative Fixed Rate Non Earning Assets Yield 600 250 150 Liabilities Rate 600 220 11% ON 100 Equity Total 1000 1000 32. Calculate the Gap 33. Calculate Net Interest income 34. Calculate Net Interest Margin 35. Recalculate Net Interest Income and Net Interest margin when interest rates increase by 1% 36. Calculate a the Duration and Modified Duration of the following Bond Current Price $1,026.24 Face Value 1000 Coupon Rate 8% Maturity 3 years Annual Bond 37....
Assume that the price of a $1,000 zero coupon bond with 7 years to maturity is $547 when the required rate of return is 9 percent. If the required rate of return suddenly changes to 13 percent, what is the price elasticity of the bond? 7. 8. Assume a bond with a $1,000 par value and an 7 percent coupon rate, two years remaining to maturity, and a 9 percent yield to maturity. What is the duration of this bond?
a. An investor buys a 5 % annual coupon payment bond with three years to maturity. The bond has a yield-to-maturity of 9%. The par value is $1000. i. Determine the market price of the bond. (2 marks) ii. Calculate the bond's duration. (3 marks) b.A bond portfolio consists of the following three annual coupon payment bonds. Prices are per 100 of par value. Modified Duration Yield-to- Coupon (%) Bond Maturity Market (years) Price Maturity (%) (years) 5.23 7.98 Value...
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