固定收益证券试题及部分答案Word格式文档下载.docx

固定收益证券试题及部分答案Word格式文档下载.docx

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《固定收益证券》试题

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成绩：

1）Explainwhyyouagreeordisagreewiththefollowingstatement:

“Thepriceofafloaterwillalwaystradeatitsparvalue.”

Answer:

Idisagreewiththestatement:

“Thepriceofafloaterwillalwaystradeatitsparvalue.”First,thecouponrateofafloating-ratesecurity（orfloater）isequaltoareferencerateplussomespreadormargin.Forexample,thecouponrateofafloatercanresetattherateonathree-monthTreasurybill（thereferencerate）plus50basispoints（thespread）.Next,thepriceofafloaterdependsontwofactors:

（1）thespreadoverthereferencerateand

（2）anyrestrictionsthatmaybeimposedontheresettingofthecouponrate.Forexample,afloatermayhaveamaximumcouponratecalledacaporaminimumcouponratecalledafloor.Thepriceofafloaterwilltradeclosetoitsparvalueaslongas

（1）thespreadabovethereferenceratethatthemarketrequiresisunchangedand

（2）neitherthecapnorthefloorisreached.However,ifthemarketrequiresalarger（smaller）spread,thepriceofafloaterwilltradebelow（above）par.Ifthecouponrateisrestrictedfromchangingtothereferencerateplusthespreadbecauseofthecap,thenthepriceofafloaterwilltradebelowpar.

2）Aportfoliomanagerisconsideringbuyingtwobonds.BondAmaturesinthreeyearsandhasacouponrateof10%payablesemiannually.BondB,ofthesamecreditquality,maturesin10yearsandhasacouponrateof12%payablesemiannually.Bothbondsarepricedatpar.

（a）Supposethattheportfoliomanagerplanstoholdthebondthatispurchasedforthreeyears.Whichwouldbethebestbondfortheportfoliomanagertopurchase?

Theshortertermbondwillpayalowercouponratebutitwilllikelycostlessforagivenmarketrate.Sincethebondsareofequalriskintermsofcreitquality（Thematuritypremiumforthelongertermbondshouldbegreater）,thequestionwhencomparingthetwobondinvestmentsis:

Whatinvestmentwillbeexpectetogivethehighestcashflowperdollarinvested?

Inotherwords,whichinvestmentwillbeexpectedtogivethehighesteffectiveannualrateofreturn.Ingeneral,holdingthelongertermbondshouldcompensatetheinvestorintheformofamaturitypremiumandahigherexpectedreturn.However,asseeninthediscussionbelow,theactualrealizedreturnforeitherinvestmentisnotknownwithcertainty.

Tobeginwith,aninvestorwhopurchasesabondcanexpecttoreceiveadollarreturnfrom（i）theperiodiccouponinterestpaymentsmadebetheissuer,（ii）ancapitalgainwhenthebondmatures,iscalled,orissold;

and（iii）interestincomegeneratedfromreinvestmentoftheperiodiccashflows.Thelastcomponentofthepotentialdollarreturnisreferredtoasreinvestmentincome.Forastandardbond（oursituation）thatmakesonlycouponpaymentsandnoperiodicprincipalpaymentspriortothematuritydate,theinterimcashflowsaresimplythecouponpayments.Consequently,forsuchbondsthereinvestmentincomeissimplyinterestearnedfromreinvestingthecouponinterestpayments.Forthesebonds,thethirdcomponentofthepotentialsourceofdollarreturnisreferredtoastheinterest-on-interestcomponents.

Ifwearegoingtocouputeapotentialyieldtomakeadecision,weshouldbeawareofthefactthatanymeasureofabond’spotentialyieldshouldtakeintoconsiderationeachofthethreecomponentsdescribedabove.Thecurrentyieldconsidersonlythecouponinterestpayments.Noconsiderationisgiventoanycapitalgainorinterestoninterest.Theyieldtomaturitytakesintoaccountcouponinterestandanycapitalgain.Italsoconsiderstheinterest-on-interestcomponent.Additionally,implicitintheyield-to-maturitycomputationistheassumptionthatthecouponpaymentscanbereinvestedatthecomputedyieldtomaturity.Theyieldtomaturityisapromisedyieldandwillberealizedonlyifthebondisheldtomaturityandthecouponinterestpaymentsarereinvestedattheyieldtomaturity.Ifthebondisnotheldtomaturityandthecouponpaymentsarereinvestedattheyieldtomaturity,thentheactualyieldrealizedbyaninvestorcanbegreaterthanorlessthantheyieldtomaturity.

Giventhefactsthat（i）onebond,ifbought,willnotbeheldtomaturity,and（ii）thecouponinterestpaymentswillbereinvestedatanunknownrate,wecannotdeterminewhichbondmightgivethehighestactualrealizedrate.Thus,wecannotcomparethembaseduponthiscriterion.However,iftheportfoliomanagerisriskinverseinthesensethatsheorhedoesn’twanttobuyalongertermbond,whichwilllikelhavemorevariabilityinitsreturn,thenthemanagermightprefertheshortertermbond（bondA）ofthresyears.Thisbondalsomatureswhenthemanagerwantstocashinthebond.Thus,themanagerwouldnothavetoworryaboutanypotentialcapitallossinsellingthelongertermbond（bo