The table below lists the principal amounts of each bill auctioned and the scale of bidding on 26th January 2018. Maturity Date Principal Amount Sold Aggregate Scale of Bids 26th February 2018 £500 million £2711.5 million 30th April 2018 £500 million £2869.0 million 30th July 2018 £2000 million £6134.5 million Calculate and comment on the significance of the bid-to-cover ratios given the size of the yields.

The table below lists the principal amounts of each bill auctioned and the scale of bidding on 26th January 2018. Maturity Date Principal Amount Sold Aggregate Scale of Bids 26th February 2018 £500 million £2711.5 million 30th April 2018 £500 million £2869.0 million 30th July 2018 £2000 million £6134.5 million Calculate and comment on the significance of the bid-to-cover ratios given the size of the yields.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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You obtained a sample of Treasury bill auction results, but some of the key info is missing. Based on the information provided in the table below, answer the following questions. Treasury Auction Results 56-day Bill Term and Type of Security CUSIP Number High Rate Allotted at High Price Investment Rate Median Rate Low Rate Issue Date Maturity Date 917536YD6 2.875% (missing) (missing) (missing) 2.750% 2.500% Total September 30, 2022 November 25, 2022 Tendered Accepted Competitive $110,325,483,000 $5,051,300,500 Noncompetitive (missing) (missing) $6,611,971,000
Using the spot and outright forward quotes in the table below, determine the corresponding bid-ask spreads in points. Spot 1.3508 − 1.3524 One-Month 1.3520 − 1.3541 Three-Month 1.3536 − 1.3562 Six-Month 1.3576 − 1.3610
Calculate Duolingo’s underpricing if the offer price equals $102 and the closing price on the first trading day equals $134.26.
Required: (i) Calculate the bid-ask percentage spread on the 90-day forward £. (ii) Calculate the annualised 90-day forward discount on ask for the £. (iii) Demonstrate how to realise a profit via covered interest arbitrage if you arbitrage £ 1m. (iv) Explain why a covered interest arbitrage opportunity exists in this situation. Explain what is meant by the term ‘uncovered interest arbitrage’.
Answer the next 4 questions using the information in the following table. You are considering the purchase of a $1,000 par value Treasury Bill and observe the following quotes for T-Bills in the market: Ignore transaction costs. Time to Maturity (days) Bid Asked % % 60 1.64 1.55 88 1.63 1.54 116 1.62 1.53 144 1.61 1.52 4. The bid price of a T-bill in the secondary market is A. the price at which the dealer in T-bills is willing to sell the bill. B. the price at which the investor in T-bills is willing to sell the bill. C. larger than the ask price of the T-bill. D. The price at which the investor can buy the T-bill. 5. What is the purchase price of the 144-day bill that you face? А. $993.29 B. $993.56 С. $993.92 D. $994.05
(i) Calculate the bid-ask percentage spread on the 90-day forward £.(ii) Calculate the annualised 90-day forward discount on ask for the £.(iii) Demonstrate how to realise a profit via covered interest arbitrage if you arbitrage £ 1m.(iv) Explain why a covered interest arbitrage opportunity exists in this situation. Explain what is meant by the term ‘uncovered interest arbitrage’.
When the Australian government issues government bonds during a tender, the cumulative aggregate/total demand by bidders is the following: Yield Total cumulative aggregate demand (in AUD million face value) 2.20% 2,200 2.15% 2,050 2.10% 1,950 2.05% 1,900 2.00% 1,820 Calculate the ratio that will be used to calculate the allocation of government bonds to the bidders who bid the cut-off yield. Explain in details the process you have followed to calculate the ratio.
The graph (attached) depicts yield curves for 5 November 2021, 5 November, 2022, and 5 November, 2019. The yield rates are given for each of those in the graph (attached). a) As of 5 November 2021, what is the one-month interest rate expected by market participants in 5 January, 2022? Are they expecting a change in monetary policy within that time frame?
3. Compute invoice price of the following positions for settlement date Sept 10, 2016: (Do not use the excel formula ‘ACCRINT' for accrued interest). Position Sell Sell Buy Sell Maturity 2/1/2017 5/15/2020 11/15/2040 8/15/2046 Bid Discount 1.065% Annual Coupon Rate 7.125% 3.375% 4.875% Bid Price 133.9891 127.0313 96.2969 Asked Price 133.8047 127.0938 96.3281
Based on the information provided below, estimate the total profit or loss on a position: 1. Instrument traded: Futures Contract (London Metal Exchange) 2. Underlying metal: Nickel of 99.80% purity 3. Number of instruments traded: 130 4. Position taken: short 5. Quotation: USD per tonne 6. Lot size = 6 tonnes. %3D 7. Settlement type: physical 8. Futures price: 18782 9. Settlement price at the time of expiration: 18430
Demonstrate how FRAs, BAB futures and interest rate swaps establishes the company's cost of funds for the initial issue of the bills in a bills facility. For the purposes of your demonstration, assume: the two-year bill facility uses 90-day BABs with a face value of $1 million; the facility is being organised in May for commencement in mid June 2022; when the bill facility was being organised the sune 2022 BAB futures price was 94.45 and the September 2022 BAB futures price was 94.65; the two-year swap rate in June is 5.45%pa the 90-day spot rate was 5.35%pa in mid-June (the settlement date for June 2022 futures) the June FRA rate matches the relevant BAB futures rate
Assume a futures price of Php5000 at the start of the transaction, with Php250 initial margin requirement and a Ph150 maintenance margin requirement. The trader takes in a short position of 10 contracts. Marking-to-market process occurs over the period of seven trading days. A. Complete the table above for the holder of the long position. B. When could there be a margin call? C. How much are the total gains or losses by the end of day 7?

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Maturity Date	Principal Amount Sold	Aggregate Scale of Bids
26^th February 2018	£500 million	£2711.5 million
30^th April 2018	£500 million	£2869.0 million
30^th July 2018	£2000 million	£6134.5 million