2. (Immunization of FI) Consider a financial institution whose asset and liability both consist of coupon bonds only. The asset is a 10-year bond with face value $100 million, coupon rate 9.8% and yield 4%, while the liability is a 15-year bond with face value $100 million, coupon rate 8.2% and yield 4%. Both bonds pay coupon semiannually. Assume parallel yield shift. Required precision: 4 digits after decimal point for duration calculation; 2 digits after decimal point for dollar amount in million, e.g. $12.34 million; 4 digits after decimal point for percentage (coupon) rates, e.g. 1.2345%. (a) What are the market values of asset, liability and equity of this FI? What is its leverage-adjusted modified duration gap? (b) According to the duration model, what would the market value of equity be for a 10 basis points decrease in the yield?

88 MULTIPLE CHOICE Question 4 Listen A swim club is interested in its members' swim times for each distance. The data analysts gathered data and plotted it on a scatterplot with the x-axis represent- ing the distance swam and the y-axis representing the swim time. A linear re- gression was used to model the data where r=0.83. What is the value and interpretation of r²? Hint: Calculate r2 by squaring the r value. The explanatory variable is on the x-axis. The response variable is on the y-axis. Interpret r² as: About percent of the variation in the response variable can be ex- plained by the explanatory variable. A r²=0.9110 About 91.1% of the variation in the change of swim time can be ex- plained by the distance swam. B r²=0.6889 About 68.89% of the variation in the change of swim time can be explained by the distance swam. C r²=0.6889 About 68.89% of the variation in the change of the distance swam can be explained by the swim time. Points

QUESTION 2 S = 48 X = 50 C=$4 P = $3 A straddle requires purchasing one call and one put on the same asset with the same strike price. For this data the payoff for a straddle is a. $2 O b.-$1 Oc. $0 O d.-$7 O e. -$5

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Vijay

X Cut LB Copy Format Painter Clipboard 1 Calibri 11 V Font Α Α΄ BIU A V Conditional Format as Cell Formatting Table Styles ✓ Styles Alignment 3. A bank offers to pay you a stated annual rate of 5%, compounded daily. How many years will it take you to double your money in this acc Wrap Text Merge & Center S General S $%9588-00 Number 4 ← V Insert A 1. You plan to invest $1,000 today in an investment that you expect will earn a stated annual rate of 9% compounded semi-annually. How much will your investment be worth in 10 years? ato of 5% compounded daily. How many years will it take you to double w