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1、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 (o
2、r 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 refe
3、rence 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 refere
4、nce 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 becaus
5、e 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 semiann
6、ually. 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 m
7、arket rate.Since 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 invested?In other words,which inve
8、stment will be expected to give the highest effective annual rate of return.In general,holding the longer term bond should compensate the investor in the form of a maturity premium and a higher expected return.However,as seen in the discussion below,the actual realized return for either investment i
9、s 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
10、periodic cash flows.The last component of the potential dollar return is referred to as reinvestment income.For 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 payments.Consequent
11、ly,for such bonds the reinvestment income is simply interest earned from reinvesting the coupon interest payments.For these bonds,the third component of the potential source of dollar return is referred to as the interest-on-interest components.If we are going to coupute a potential yield to make a
12、decision,we should be aware of the fact that any measure of a bonds potential yield should take into consideration each of the three components described above.The current yield considers only the coupon interest payments.No consideration is given to any capital gain or interest on interest.The yiel
13、d to maturity takes into account coupon interest and any capital gain.It also considers the interest-on-interest component.Additionally,implicit in the yield-to-maturity computation is the assumption that the coupon payments can be reinvested at the computed yield to maturity.The yield to maturity i
14、s a promised yield and will be realized only if the bond is held to maturity and the coupon interest payments are reinvested at the yield to maturity.If the bond is not held to maturity and the coupon payments are reinvested at the yield to maturity,then the actual yield realized by an investor can
15、be greater than or less than the yield to maturity.Given the facts that(i)one bond,if bought,will not be held to maturity,and(ii)the coupon interest payments will be reinvested at an unknown rate,we cannot determine which bond might give the highest actual realized rate.Thus,we cannot compare them b
16、ased upon this criterion.However,if the portfolio manager is risk inverse in the sense that she or he doesnt want to buy a longer term bond,which will likel have more variability in its return,then the manager might prefer the shorter term bond(bondA) of thres years.This bond also matures when the manager wants to cash in the bond.Thus,the manager would not have to worry about any potential capital loss in selling the longer term bond(bondB).The manager would
