Weekly Practice Exam "FM" Problems courtesy of Dr Krzysztof Ostaszewski

[krzysio]

Please find it at
http://www.math.ilstu.edu/krzysio/KO-FM-Exercise20.pdf
Yours,
Krzys'

[krzysio]

Please find it at:
www.math.ilstu.edu/krzysio/KO-FM-Exercise21.pdf
I hope you will enjoy it.

Yours,
Krzys'

[krzysio]

Please find it at:
www.math.ilstu.edu/krzysio/KO-FM-Exercise22.pdf
I hope you will enjoy it.

Yours,
Krzys'

[krzysio]

This exercise is not a multiple choice exam-like problem, but instead a slightly longer problem discussing the range of possible yields on a callable bond:
http://www.math.ilstu.edu/krzysio/KO-FM-Exercise23.pdf
I hope you will enjoy it.
Yours,
Krzys' Ostaszewski

[krzysio]

I am going to speed up postings just before the exam, so that you can get some extra material.
http://www.math.ilstu.edu/krzysio/KO-FM-Exercise24.pdf
I hope you will enjoy it.
Yours,
Krzys' Ostaszewski

[krzysio]

http://www.math.ilstu.edu/krzysio/KO-FM-Exercise25.pdf
I hope you will enjoy it.
Yours,
Krzys' Ostaszewski

[Arnold Kim]

http://www.math.ilstu.edu/krzysio/KO-FM-Exercise25.pdf
I hope you will enjoy it.
Yours,
Krzys' Ostaszewski

Question about this one:

In the solution it said that the present value of the 2 year bond is

$95,238.1/1.044 + $1,904,761.9/1.044^2

Shouldn't the last figure there be

$2,000,000/1.044^2? Why does it seem to not include the second coupon payment?

[krzysio]

Question about this one:

In the solution it said that the present value of the 2 year bond is

$95,238.1/1.044 + $1,904,761.9/1.044^2

Shouldn't the last figure there be

$2,000,000/1.044^2? Why does it seem to not include the second coupon payment?

Dear Arnold Kim:
Gosh, you must be ready for this test! Yes, you are right. I posted a corrected version now. Thanks for noticing this.
Yours,
Krzys'

[bv12]

Question regarding Sample Exercise 11:

Did I make an incorrect assumption of some sort here?
5(X)^n = 8 where X = 1+i
X^n = 8/5

Substitute that into the equation for the accumulated value:
(X^n - 1)/d = 8

and you have:

(8/5 - 1)/d = 8 ---> d=.075

[krzysio]

Nope. You did a great job, you find a quick and effective solution. Congratulations and thank you for pointing it out. Great work.

Yours,
Krzys' Ostaszewski
author of the Course FM manual at NEAS-seminars.com

Question regarding Sample Exercise 11:

Did I make an incorrect assumption of some sort here?
5(X)^n = 8 where X = 1+i
X^n = 8/5

Substitute that into the equation for the accumulated value:
(X^n - 1)/d = 8

and you have:

(8/5 - 1)/d = 8 ---> d=.075