对外经济贸易大学国际经济贸易学院固定收益证券部分答案

对外经济贸易大学国际经济贸易学院固定收益

证券部分答案

Company number：【0089WT-8898YT-W8CCB-BUUT-202108】

国际经济贸易学院研究生课程班

《固定收益证券》试题

1）Explain why you agree or disagree with the following statement: “The price of a floater will always trade at its par value.”

Answer:I disagree with the statement: “The price of a floater will always trade at its par value.” First, the coupon rate of a floating-rate security (or floater) is equal to a reference rate plus some spread or margin. For example, the coupon rate of a floater can reset at the rate on a three-month Treasury bill (the reference rate) plus 50 basis points (the spread). Next, the price of a floater depends on two factors: (1) the spread over the reference rate and (2) any restrictions that may be imposed on the resetting of the coupon rate. For example, a floater may have a maximum coupon rate called a cap or a minimum coupon rate called a floor. The price of a floater will trade close to its par value as long as (1) the spread above the reference rate that the market requires is unchanged and (2) neither the cap nor the floor is reached. However, if the market requires a larger (smaller) spread, the price of a floater will trade below (above) par. If the coupon rate is restricted from changing to the reference rate plus the spread because of the cap, then the price of a floater will trade below par.

2） A portfolio manager is considering buying two bonds. Bond A matures in three years and has a coupon rate of 10% payable semiannually. Bond B, of the same credit quality, matures in 10 years and has a coupon rate of 12% payable semiannually. Both bonds are priced at par.

(a) Suppose that the portfolio manager plans to hold the bond that is purchased for three years. Which would be the best bond for the portfolio manager to purchase

Answer:The shorter term bond will pay a lower coupon rate but it will likely cost less for a given market the bonds are of equal risk in terms of creit quality (The maturity premium for the longer term bond should be greater),the question when comparing the two bond investments is:What investment will be expecte to give the highest cash flow per dollar investedIn other words,which investment will be expected to give the highest effective annual rate of general,holding the longer term bond should compensate the investor in the form of a maturity premium and a higher expected ,as seen in the discussion below,the actual realized return for either investment is not known with certainty.

To begin with,an investor who purchases a bond can expect to receive a dollar return from(i)the periodic coupon interest payments made be the issuer,(ii)an capital gain when the bond matures,is called,or is sold;and (iii)interest income generated from reinvestment of the periodic cash last component of the potential dollar return is referred to as reinvestment a standard bond(our situation)that makes only coupon payments and no periodic principal payments prior to the maturity date,the interim cash flows are simply the coupon ,for such bonds the reinvestment income is simply interest earned from reinvesting the coupon interest these bonds,the third component of the potential source of dollar return is referred to as the interest-on-interest components.