Financial Modeling

Financial Modeling

52:390:379:01:06389

Spring 2021

1

Take-Home Exam II.

1. Submit your solutions to the specific questions below, electronically via Canvas. To

upload your solution, go to our Canvas page, select the ‘Assignments’ folder on the

left, choose Exam II, and click on “View Details and Submit.” Once you have attached

the file, please, click SUBMIT. Clicking SAVE AND EXIT is not enough! Please, do not

e-mail me your assignments.

2. Please, use the attached Excel template for your solutions.

3. You must submit your solution by 11:55 p.m. on Monday, April 5, 2021. Late

submissions are not accepted.

4. Please, submit just ONE file. You do NOT have to submit .docx or .pdf files along with

your Excel file.

5. Exams are individual assignments, and are not supposed to be done in groups.

1. (5 points) The 6 1

4 T-bond (US) of August 15, 2023, was priced on March 28, 2014 to

yield 2.551% to maturity. What was the quoted price (in dollars per hundred dollars

of face value)? If you had bought the bond, how much would you have been

invoiced? State the quoted price in hundreds and 32nds. Note that you are required

to compute the bond’s price and accrued interest both using, and not using, Excel’s

PRICE() an ACCRINT() functions. Plot the price-yield relationship for the bond. To do

that, compute a set of bond’s clean prices for different yields-to-maturity in cells

E2:F42. To answer this question, use the spreadsheet tabbed “Bond Pricing” in the

attached file.

2. (5 points) The spreadsheet tabbed “Bond Data” contains US bond data from the

Wall Street Journal on March 15, 2014. For each bond, find the dates of previous and

next coupon payments (relative to March 15, 2014), the number of days in the

coupon period, the number of days elapsed since the last coupon payment, the

accrued interest, and the invoice price. Compute the yield-to-maturity for each bond.

3. (5 points) Given the information on the spreadsheet tabbed “Bond Data,” find the

price for a corporate 8 1

8 US bond of March 15, 2017 on March 15, 2014. The static

spread for the bond is perceived by investors to be 3.5%. To do that, first find a set

of zero prices and spot rates on coupon payment dates for the bond, and then use

the method of replicating portfolios. Find the yield-to-maturity for the bond.

2

To answer this question, use the spreadsheet tabbed “Corporate Bond” in the

attached file.

4. (5 points) Given the information on the spreadsheet tabbed “Bond Data,” which of

the following two bonds is perceived by investors to be riskier (as measured by the

static spread)?

a. 3 1

4 corporate bond (US) of September 15, 2016 traded at 101

5

32 on March 15,

2014.

b. 1 6

8 corporate bond (US) of September 15, 2015 traded at 99

17

32 on March 15,

2014.

Find the yield-to-maturity for both bonds.

To answer this question, use the spreadsheet tabbed “Static Spread” in the attached

file.