Additionally, please answer the following questions about CMOs. For questions 8-11, assume there exists a tranche of a CMO with a total principle value of $80,000,000. This tranche is divided into $60,000,000 of floaters and $20,000,000 of inverse floaters. The pool is at a fixed rate of 8%. 8) If the floaters' coupon is set at LIBOR, how is the coupon set on the inverse floaters? 10. How does the duration of the inverse floater compare with the duration of an 8% fixed rate note of comparable maturity to the mortgage pool? 11) If the duration of the underlying mortgage pool is 6 years and an investor were to lever up their position in the inverse floater by 2.5 - to-1, what would be the duration of their position?

Suppose that the assets of a bank consist of 200 million euros of retail loans. The PD is 1% and the LGD is estimated to be 70%. The WCDR is equal to (in computations, round off all values to the 4th decimal place) The value in million euros of RWA under the F-IRB approach is (round off the final result to the 2nd decimal place) Capital Requirements, in million euros, are (round off the final result to the 2nd decimal place)

Investment X offers to pay you $4,700 per year for 9 years, whereas Investment Y offers to pay you $6,400 per year for 5 years.     a. If the discount rate is 8 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) b. If the discount rate is 20 percent, what is the present value of these cash flows?

Can you explain step by step how you get $1,104.23 by plugging in the numbers and using the formula below?:   Given: Coupon rate (6.55%), maturity (15 years), purchase YTM (6.15%). Adjust coupon and maturity for semi-annual periods: Coupon per period = 6.55% / 2 = 3.275%. Number of periods = 15 years * 2 = 30 periods. Use the bond pricing formula: Price = (Coupon * (1 - (1 + YTM/2)^-Number of periods)) / (YTM/2 + (1 + YTM/2)^-Number of periods)  Plug in the values: Price ≈ $1,104.23.

Vijay

Consider a 1-year investment agreement that follows an 80/20 split after an 8% preferred coupon is paid. If the investor contributes 95% of the money and the fund contributes the remaining 5%, what will be the percent return to the fund if the investment yields 12%.

Consider two assets with the following cash flow streams:   Asset A generates $4 at t=1, $3 at t=2, and $10 at t=3. Asset B generates $2 at t=1, $X at t=2, and $10 at t=3.   Suppose X=6 and the interest rate r is constant.   For r=0.1, calculate the present value of the two assets. Determine the set of all interest rates {r} such that asset A is more valuable than asset Draw the present value of the assets as a function of the interest rate. Suppose r=0.2. Find the value X such that the present value of asset B is 12. Suppose the (one-period) interest rates are variable and given as follows: r01=0.1,r12=0.2, r23=0.3. Calculate the yield to maturity of asset A. (You can use Excel or ascientific calculator to find the solution numerically.)

A two-year maturity floater. Assume annual coupon payment and $1,000 par. Its discount rate is Libor + 2%. The discount rate for fixed cash flows is 2%   a. What is the price of this floater if the coupon is Libor + 2%?   b. What is the price of this floater if the coupon is Libor + 1%?

(Present value of an uneven stream of payments) You are given three investment alternatives to analyze. The cash flows from these three investments are as follows: Investment B A $ 1,000 2,000 3,000 (4,000) 1,000 4,000 3,000 (Click on the icon in order to copy its contents into a spreadsheet.) What is the present value of each of these three investments if the appropriate discount rate is 9 percent? $ End of Year 1 SA NM CO 2 3 4 5 $ 1,000 1,000 1,000 C $ 5,000 a. What is the present value of investment A at an annual discount rate of 9 percent? (Round to the nearest cent.) b. What is the present value of investment B at an annual discount rate of 9 percent? (Round to the nearest cent.) c. What is the present value of investment C at an annual discount rate of 9 percent? (Round to the nearest cent.) 5,000 (5,000) (5,000) 15.000

Jones expects an immediate investment of $73,759.50 to return $15,000 annually for six years, with the first payment to be received one year from now. What rate of interest must Jones eam? (PV of $1. EV of $1. PVA of $1. and EVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Table Factor Interest Rate Present Value Annuity Payment