對(duì)外經(jīng)濟(jì)貿(mào)易大學(xué)國(guó)際經(jīng)濟(jì)貿(mào)易學(xué)院固定收益證券部分答案

1、國(guó)際經(jīng)濟(jì)貿(mào)易學(xué)院研究生課程班固定收益證券試題1 )Explainwhyyouagreeordisagreewiththefollowingstatement:“Thepriceofafloaterwillalwaystradeatitsparvalue.”Answer:Idisagreewiththestatement:“Thepriceofafloaterwillalwaystradeatitsparvalue.”First,thecouponrateofafloating-ratesecurity(orfloater)isequaltoareferencerateplussomesprea

2、dormargin.Forexample,thecouponrateofafloatercanresetattherateonathree-monthTreasurybill(thereferencerate)plus50basispoints(thespread).Next,thepriceofafloaterdependsontwofactors:(1)thespreadoverthereferencerateand(2)anyrestrictionsthatmaybeimposedontheresettingofthecouponrate.Forexample,afloatermayha

3、veamaximumcouponratecalledacaporaminimumcouponratecalledafloor.Thepriceofafloaterwilltradeclosetoitsparvalueaslongas(1)thespreadabovethereferenceratethatthemarketrequiresisunchangedand(2)neitherthecapnorthefloorisreached.However,ifthemarketrequiresalarger(smaller)spread,thepriceofafloaterwilltradebe

4、low(above)par.Ifthecouponrateisrestrictedfromchangingtothereferencerateplusthespreadbecauseofthecap,thenthepriceofafloaterwilltradebelowpar.2 )Aportfoliomanagerisconsideringbuyingtwobonds.BondAmaturesinthreeyearsandhasacouponrateof10%payablesemiannually.BondB,ofthesamecreditquality,maturesin10yearsa

5、ndhasacouponrateof12%payablesemiannually.Bothbondsarepricedatpar.(a) Supposethattheportfoliomanagerplanstoholdthebondthatispurchasedforthreeyears.Whichwouldbethebestbondfortheportfoliomanagertopurchase?Answer:Theshortertermbondwillpayalowercouponratebutitwilllikelycostlessforagivenmarketrate.Sinceth

6、ebondsareofequalriskintermsofcreitquality(Thematuritypremiumforthelongertermbondshouldbegreater),thequestionwhencomparingthetwobondinvestmentsis:Whatinvestmentwillbeexpectetogivethehighestcashflowperdollarinvested?Inotherwords,whichinvestmentwillbeexpectedtogivethehighesteffectiveannualrateofreturn.

7、Ingeneral,holdingthelongertermbondshouldcompensatetheinvestorintheformofamaturitypremiumandahigherexpectedreturn.However,asseeninthediscussionbelow,theactualrealizedreturnforeitherinvestmentisnotknownwithcertainty.Tobeginwith,aninvestorwhopurchasesabondcanexpecttoreceiveadollarreturnfrom(i)theperiod

8、iccouponinterestpaymentsmadebetheissuer,(ii)ancapitalgainwhenthebondmatures,iscalled,orissold;and(iii)interestincomegeneratedfromreinvestmentoftheperiodiccashflows.Thelastcomponentofthepotentialdollarreturnisreferredtoasreinvestmentincome.Forastandardbond(oursituation)thatmakesonlycouponpaymentsandn

9、operiodicprincipalpaymentspriortothematuritydate,theinterimcashflowsaresimplythecouponpayments.Consequently,forsuchbondsthereinvestmentincomeissimplyinterestearnedfromreinvestingthecouponinterestpayments.Forthesebonds,thethirdcomponentofthepotentialsourceofdollarreturnisreferredtoastheinterest-on-in

10、terestcomponents.Ifwearegoingtocouputeapotentialyieldtomakeadecision,weshouldbeawareofthefactthatanymeasureofabondspotentialyieldshouldtakeintoconsiderationeachofthethreecomponentsdescribedabove.Thecurrentyieldconsidersonlythecouponinterestpayments.Noconsiderationisgiventoanycapitalgainorinterestoni

11、nterest.Theyieldtomaturitytakesintoaccountcouponinterestandanycapitalgain.Italsoconsiderstheinterest-on-interestcomponent.Additionally,implicitintheyield-to-maturitycomputationistheassumptionthatthecouponpaymentscanbereinvestedatthecomputedyieldtomaturity.Theyieldtomaturityisapromisedyieldandwillber

12、ealizedonlyifthebondisheldtomaturityandthecouponinterestpaymentsarereinvestedattheyieldtomaturity.Ifthebondisnotheldtomaturityandthecouponpaymentsarereinvestedattheyieldtomaturity,thentheactualyieldrealizedbyaninvestorcanbegreaterthanorlessthantheyieldtomaturity.Giventhefactsthat(i)onebond,ifbought,

13、willnotbeheldtomaturity,and(ii)thecouponinterestpaymentswillbereinvestedatanunknownrate,wecannotdeterminewhichbondmightgivethehighestactualrealizedrate.Thus,wecannotcomparethembaseduponthiscriterion.However,iftheportfoliomanagerisriskinverseinthesensethatsheorhedoesntwanttobuyalongertermbond,whichwi

14、lllikelhavemorevariabilityinitsreturn,thenthemanagermightprefertheshortertermbond(bondA)ofthresyears.Thisbondalsomatureswhenthemanagerwantstocashinthebond.Thus,themanagerwouldnothavetoworryaboutanypotentialcapitallossinsellingthelongertermbond(bondB).Themanagerwouldknowwithcertaintywhatthecashflowsa

15、re.IfThesecashflowsarespentwhenreceived,themanagerwouldknowexactlyhowmuchmoneycouldbespentatcertainpointsintime.Finally,amanagercantrytoprojectthetotalreturnperformanceofabondonthebasisofthepannedinvestmenthorizonandexpectationsconcerningreinvestmentratesandfuturemarketyields.Thisermitstheportfoliom

16、anagertoevaluatethichofseveralpotentialbondsconsideredforacquisitionwillperformbestovertheplannedinvestmenthorizon.Aswejustrgued,thiscannotbedoneusingtheyieldtomaturityasameasureofrelativevalue.Usingtotalreturntoassessperformanceoversomeinvestmenthorizoniscalledhorizonanalysis.Whenatotalreturniscalc

17、ulatedovenaninvestmenthorizon,itisreferredtoasahorizonreturn.Thehorizonanalysisframworenabledtheportfoliomanagertoanalyzetheperformanceofabondunderdifferentinterest-ratescenariosforreinvestmentratesandfuturemarketyields.Onlybyinvestigatingmultiplescenarioscantheportfoliomanagerseehowsensitivethebond

18、sperformancewillbetoeachscenario.Thiscanhelpthemanagerchoosebetweenthetwobondchoices.(b) Supposethattheportfoliomanagerplanstoholdthebondthatispurchasedforsixyearsinsteadofthreeyears.Inthiscase,whichwouldbethebestbondfortheportfoliomanagertopurchase?Answer:Simileartoourdiscussioninpart(a),wedonotkno

19、wwhichinvestmentwouldgivethehighestactualrelizedreturninsixyearswhenweconsiderreinvestingallcashflows.Ifthemanagerbuysathree-yearbond,thentherewouldbetheadditionaluncertaintyofnowknowingwhatthree-yearbondrateswouldbeinthreeyears.Thepurchaseoftheten-yearbondwouldbeheldlongerthanpreviously(sixyearscom

20、paredtothreeyears)andrendercouponpaymentsforasix-yearperiodthatareknown.Ifthesecashflowsarespentwhenreceived,themanagerwillknowexactlyhowmuchmoneycouldbespentatcertainpointsintimeNotknowingwhichbondinvestmentwouldgivethehighestrealizedreturn,theportfoliomanagerwouldchoosethebondthatfitsthefirmsgoals

21、intermsofmaturity.3 )AnswerthebelowquestionsforbondsAandB.BondABondBCoupon8%9%Yieldto8%8%maturityMaturity25(years)Par$100.00$100.00Price$100.00$104.055(a) Calculatetheactualpriceofthebondsfora100-basis-pointincreaseininterestrates.Answer:ForBondA,wegetabondquoteof$100forourinitialpriceifwehavean8%co

22、uponrateandan8%yield.Ifwechangetheyield100basispointsotheyieldis9%,thenthevalueofthebond(P)isthepresentvalueofthecouponpaymentsplusthepresentvalueoftheparvalue.WehaveC=$40,y=4.5%,n=4,andM=$1,000.Insertingthesenumbersintoourpresentvalueofcouponbondformula,weget:Thepresentvalueoftheparormaturityvalueo

23、f$1,000is:Thus,thevalueofbondAwithayieldof9%,acouponrateof8%,andamaturityof2yearsis:P=$143.501+$838.561=$982.062.Thus,wegetabondquoteof$98.2062.WealreadyknowthatbondBwillgiveabondvalueof$1,000andabondquoteof$100sinceachangeof100basispointswillmaketheyieldandcouponratethesame,Forexample,insertingThus

24、,thevalueofbondAwithayieldof9%,acouponrateof8%,andamaturityof2yearsis:P=$143.501+$838.561=$982.062.Thus,wegetabondquoteof$98.2062.WealreadyknowthatbondBwillgiveabondvalueof$1,000andabondquoteof$100sinceachangeof100basispointswillmaketheyieldandcouponratethesame,Forexample,inserting(b) Usingduration,

25、estimatethepriceofthebondsfora100-basis-pointincreaseininterestrates.Answer:ToestimatethepriceofbondA,webeginbyfirstcomputingthemodifiedduration.WecanuseanalternativeformulathatdoesnotrequiretheextensivecalculationsrequiredbytheMacaulayprocedure.Theformulais:Puttingallapplicablevariablesintermsof$10

26、0,wehaveC=$4,n=4,y=0.045,andP=$98.2062.Insertingthesevalues,inthemodifieddurationformulagives:($1,975.3086420.161439+$35.664491)/$98.2062=($318.89117+$35.664491)/$98.2062=$354.555664/$98.2062=3.6103185orabout3.61.Convertingtoannualnumberbydividingbytwogivesamodifieddurationof1.805159(beforetheincrea

27、sein100basispointsitwas1.814948).Wenextsolveforthechangeinpriceusingthemodifieddurationof1.805159anddy=100basispoints=0.01.Wehave:WecannowsolveforthenewpriceofbondAasshownbelow:Thisisslightlylessthantheactualpriceof$982.062.Thedifferenceis$982.062-$981.948=$0.114.ToestimatethepriceofbondB,wefollowth

28、esameprocedurejustshownforbondA.UsingthealternativeformulaformodifieddurationthatdoesnotrequiretheextensivecalculationsrequiredbytheMacaulayprocedureandnotingthatC=$45,n=10,y=0.045,andP=$100,weget:($791.27182+$0)/$100=7.912718orabout7.91(beforetheincreasein100basispointsitwas7.988834orabout7.99).Con

29、vertingtoanannualnumberbydividingbytwogivesamodifieddurationof3.956359(beforetheincreasein100basispointsitwas3.994417).WewillnowestimatethepriceofbondBusingthemodifieddurationmeasure.With100basispointsgivingdy=0.01andanapproximatedurationof3.956359,wehave:Thus,thenewpriceis(1-0.0395635)$1,040.55=(0.

30、9604364)$1,040.55=$999.382.Thisisslightlylessthantheactualpriceof$1,000.Thedifferenceis$1,000-$999.382=$0.618.(c) Usingbothdurationandconvexitymeasures,estimatethepriceofthebondsfora100-basis-pointincreaseininterestrates.Answer:ForbondA,weusethedurationandconvexitymeasuresasgivenbelow.First,weusethe

31、durationmeasure.Weadd100basispointsandgetayieldof9%.WenowhaveC=$40,y=4.5%,n=4,andM=$1,000.NOTE.Inpart(a)wecomputedtheactualbondpriceandgotP=$982.062.Priortothat,thepricesoldatpar(P=$1,000)sincethecouponrateandyieldwerethenequal.Theactualchangeinpriceis:($982.062-$1,000)=$17.938andtheactualpercentage

32、changeinpriceis:$17.938/$1,000=0.017938%.Wewillnowestimatethepricebyfirstapproximatingthedollarpricechange.With100basispointsgivingdy=0.01andamodifieddurationcomputedinpart(b)of1.805159,wehave:Thisisslightlymorenegativethantheactualpercentagedecreaseinpriceof1.7938%.Thedifferenceis1.7938%-(1.805159%

33、)=1.7938%+1.805159%=0.011359%.Usingthe1.805159%justgivenbythedurationmeasure,thenewpriceforbondAis:Thisisslightlylessthantheactualpriceof$982.062.Thedifferenceis$982.062一$981.948=$0.114.Next,weusetheconvexitymeasuretoseeifwecanaccountforthedifferenceof0.011359%.Wehave:convexitymeasure(halfyears)2_d2

34、P12Cd12Cnn(n1)(100C/y)1-1dy2Py3(1y)ny2(1y)(1y)n2PForbondA,weadd100basispointsandgetayieldof9%.WenowhaveC=$40,y=4.5%,n=4,andM=$1,000.NOTE.Inpart(a)wecomputedtheactualbondpriceandgotP=$982.062.Priortothat,thepricesoldatpar(P=$1,000)sincethecouponrateandyieldwerethenequal.Expressingnumbersintermsofa$10

35、0bondquote,wehave:C=$4,y=0.045,n=4,andP=$98.2062.Insertingthesenumbersintoourconvexitymeasureformulagives:convexitymeasure(halfyears)=2$4 /13 140.0453(1.045,16.93252($4)44(5)(100$4/y0.045)10.0452(1.045；5(1.045)6$98.2062Addingthedurationmeasureandtheconvexitymeasure,weget1.805159%+$17.938 / $1,000 =0

36、.021166%=1.783994%.Recalltheactualchangeinpriceis:($982.062-$1,000)$17.938andtheactualpercentagechangeinpriceis:-0.017938orapproximately1.7938%.Usingthe1.783994%resultingfromboththedurationandconvexitymeasures,wecanestimatethenewpriceforbondA.Wehave:Addingthedurationmeasureandtheconvexitymeasure,weg

37、et1.805159%+0.021166%=1.783994%.Recalltheactualchangeinpriceis:($982.062-$1,000)=$17.938andtheactualpercentagechangeinpriceis:$17.938/$1,000=-0.017938orapproximately1.7938%.Usingthe1.783994%resultingfromboththedurationandconvexitymeasures,wecanestimatethenewpriceforbondA.Wehave:Thisisslightlymoreneg

38、ativethantheactualpercentagedecreaseinpriceof-3.896978%.Thedifferenceis(-3.896978%)-(-3.95635%)=0.059382%Usingthe-3.95635%justgivenbythedurationmeasure,thenewpriceforBondBis:Thisisslightlylessthantheactualpriceof$1,000.Thisdifferenceis$1,000-$999.382=$0.618Weusetheconvexitymeasuretoseeifwecanaccount

39、forthedifferenceof00594%.Wehave:ForBondB,100basispointsareaddedandgetayieldof9%.WenowhaveC=$45,y=4.5%,n=10,andM=$1,000.Noteinpart(a),wecomputedtheactualbondpriceandgotP=$1,000sincethecouponrateandyieldwerethenequal.Priortothat,thepricesoldatP=$1,040.55.Expressingnumbersintermsofa$100bondquote,wehave

40、C=$4.5,y-0.045,n=10andP=$100.Insertingthesenumbersintoourconvexitymeasureformulagives:Theconvexitymeasure(inyears)=Note.DollarConvexityMeasure=ConvexityMeasure(years)timesP=dP gconvexitymeasure(dy)219.452564($100)=$1,945.2564.ThepercentagepricechangeduetoconvexityisdP1oInsertinginthevalues,weget(77.

41、8103)(0.01)20.00097463P2Thus,wehave0.097463%increaseinpricewhenweadjustforconvexitymeasure.Addingthedurationmeasureandconvexitymeasure,weget-3.9563659%+0.097263%equals-3.859096%.Recalltheactualchangeinpriceis($1,000-$1,040.55)=-$40.55andtheactualnewpriceisForBondA.Thisisaboutthesameastheactualpriceo

42、f$1,000.Thedifferenceis$1,000.394-$1,000=$0.394.Thus,usingtheconvexitymeasurealongwiththedurationmeasurehasnarrowedtheestimatedpricefromadifferenceof-$0.618to$0.394.(d) Commentontheaccuracyofyourresultsinpartsbandc,andstatewhyoneapproximationisclosertotheactualpricethantheother.Answer:ForbondA,theac

43、tualpriceis$982.062.Whenweusethedurationmeasure,wegetabondpriceof$981.948thatis$0.114lessthantheactualprice.Whenweusedurationandconvexmeasurestogether,wegetabondpriceof$982.160.Thisisslightlymorethantheactualpriceof$982.062.Thedifferenceis$982.160-$982.062=$0.098.Thus,usingtheconvexitymeasurealongwi

44、ththedurationmeasurehasnarrowedtheestimatedpricefromadifferenceof$0.114to$0.0981.ForbondB,theactualpriceis$1,000.Whenweusethedurationmeasure,wegetabondpriceof$999.382thatis$0.618lessthantheactualprice.Whenweusedurationandconvexmeasurestogether,wegetabondpriceof$1,000.394.Thisisslightlymorethantheact

45、ualpriceof$1,000.Thedifferenceis$1,000.394-$1,000=$0.394.Thus,usingtheconvexitymeasurealongwiththedurationmeasurehasnarrowedtheestimatedpricefromadifferenceof-$0.618to$0.394Aswesee,usingthedurationandconvexitymeasurestogetherismoreaccurate.Thereasonisthataddingtheconvexitymeasuretoourestimateenables

46、ustoincludethesecondderivativethatcorrectsfortheconvexityoftheprice-yieldrelationship.Moredetailsareofferedbelow.Duration(modifiedordollar)attemptstoestimateaconvexrelationshipwithastraightline(thetangentline).Wecanspecifyamathematicalrelationshipthatprovidesabetterapproximationtothepricechangeofthe

47、bondiftherequiredyieldchanges.WedothisbyusingthefirsttwotermsofaTaylorseriestoapproximatethepricechangeasfollows:DividingbothsidesofthisequationbyPtogetthepercentagepricechangegivesus:Thefirsttermontheright-handsideofequation(1)isequationforthedollarpricechangebasedondollardurationandisourapproximat

48、ionofthepricechangebasedonduration.Inequation(2),thefirsttermontheright-handsideistheapproximatepercentagechangeinpricebasedonmodifiedduration.Thesecondterminequations(1)and(2)includesthesecondderivativeofthepricefunctionforcomputingthevalueofabond.Itisthesecondderivativethatisusedasaproxymeasuretoc

49、orrectfortheconvexityoftheprice-yieldrelationship.Marketparticipantsrefertothesecondderivativeofbondpricefunctionasthedollarconvexitymeasureofthebond.Thesecondderivativedividedbypriceisameasureofthepercentagechangeinthepriceofthebondduetoconvexityandisreferredtosimplyastheconvexitymeasure.(e) Withou

50、tworkingthroughcalculations,indicatewhetherthedurationofthetwobondswouldbehigherorloweriftheyieldtomaturityis10%ratherthan8%.Answer:Liketermtomaturityandcouponrate,theyieldtomaturityisafactorthatinfluencespricevolatility.Ceterisparibus,thehighertheyieldlevel,thelowerthepricevolatility.Thesamepropert

51、yholdsformodifiedduration.Thus,a10%yieldtomaturitywillhavebothlessvolatilitythanan8%yieldtomaturityandalsoasmallerduration.Thereisconsistencybetweenthepropertiesofbondpricevolatilityandthepropertiesofmodifiedduration.Whenallotherfactorsareconstant,abondwithalongermaturitywillhavegreaterpricevolatili

52、ty.Apropertyofmodifieddurationisthatwhenallotherfactorsareconstant,abondwithalongermaturitywillhaveagreatermodifiedduration.Also,allotherfactorsbeingconstant,abondwithalowercouponratewillhavegreaterbondpricevolatility.Also,generally,abondwithalowercouponratewillhaveagreatermodifiedduration.Thus,bond

53、swithgreaterdurationswillgreaterpricevolatilities.4) Supposeaclientobservesthefollowingtwobenchmarkspreadsfortwobonds:BondissueUratedA:150basispointsBondissueVratedBBB:135basispointsYourclientisconfusedbecausehethoughtthelower-ratedbond(bondV)shouldofferahigherbenchmarkspreadthanthehigher-ratedbond(

54、bondU).ExplainwhythebenchmarkspreadmaybelowerforbondU.5) ThebidandaskyieldsforaTreasurybillwerequotedbyadealeras5.91%and5.89%,respectively.Shouldntthebidyieldbelessthantheaskyield,becausethebidyieldindicateshowmuchthedealeriswillingtopayandtheaskyieldiswhatthedealeriswillingtoselltheTreasurybillfor?

55、Answer:Thehigherbidmeansalowerprice.Sothedealeriswillingtopaylessthanwouldbepaidfortheloweraskprice.Weillustratethisbelow.Giventheyieldonabankdiscountbasis(Yd),thepriceofaTreasurybillisfoundbyfirstsolvingtheformulaforthedollardiscount(D),asfollows:ThepriceisthenPrice=F-DForthe100-dayTreasurybillwith

56、afacevalue(F)of$100,000,iftheyieldonabankdiscountbasis(Yd)isquotedas5.91%,Disequalto:Therefore,price=$100,000-$1,641.67=$98,358.33.Forthe100-dayTreasurybillwithafacevalue(F)of$100,000,iftheyieldonabankdiscountbasis(Yd)isquotedas5.89%,Disequalto:Therefore,priceis:P=F-D=$100,000-$1,636.11=$98,363.89.T

57、hus,thehigherbidquoteof5.91%(comparedtoloweraskquote5.89%)givesalowersellingpriceof$98,358.33(comparedto$98,363.89).The0.02%higheryieldtranslatesintoasellingpricethatis$5.56lower.Ingeneral,thequotedyieldonabankdiscountbasisisnotameaningfulmeasureofthereturnfromholdingaTreasurybill,fortworeasons.Firs

58、t,themeasureisbasedonaface-valueinvestmentratherthanontheactualdollaramountinvested.Second,theyieldisannualizedaccordingtoa360-dayratherthana365-dayyear,makingitdifficulttocompareTreasurybillyieldswithTreasurynotesandbonds,whichpayinterestona365-daybasis.Theuseof360daysforayearisamoneymarketconventionforsomemoneymarketinstruments,however.Despiteitsshortcomingsasameasureofreturn,thisisthemethodthatdealershaveadoptedtoquoteTreasurybil