Problem 7-16 Using Treasury Quotes [LO2] Locate the Treasury issue in Figure 7.5 maturing in August 2045. Assume a par value of $10,000. a. What is its coupon rate? Note: Enter your answer as a percent rounded to 3 decimal places, e.g., 32.161. b. What is its bid price in dollars? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. c. What was the previous day's asked price in dollars? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. a. Coupon rate b. Bid price c. Previous day's price % FIGURE 7.5 Sample Wall Street Journal U.S. Treasury Note and Bond Prices Treasury Notes and Bonds Asked Maturity Coupon Bid Asked Chg Yield 5/15/2025 2.750 96.150 96.154 -0.006 4.406 7/31/2026 0.625 88.270 88.274 -0.020 4.108 5/15/2027 2.375 93.206 93.212 -0.036 4.010 4/30/2028 1.250 87.142 87.152 -0.064 3.932 1/31/2029 1.750 88.200 88.210 -0.080 3.900 11/15/2030 0.875 80.294 80.304 -0.788 3.727 2/15/2031 1.125 82.170 82.180 -0.102 3.657 5/15/2032 2.875 93.066 93.076 -0.136 3.746 11/15/2032 4.125 102.312 103.002 -0.834 3.753 2/15/2036 4.500 108.180 108.190 -0.910 3.663 2/15/2037 4.750 111.116 111.126 -0.940 3.700 2/15/2038 4.375 106.284 106.294 -0.942 3.729 5/15/2038 4.500 108.084 108.094 -0.946 3.767 8/15/2039 4.500 108.156 108.166 -0.974 3.779 8/15/2040 3.875 100.056 100.066 -0.966 3.858 11/15/2040 1.375 67.042 67.052 -0.210 3.970 2/15/2041 4.750 111.270 111.280 -0.962 3.831 8/15/2041 3.750 97.300 97.310 -0.944 3.905 2/15/2042 3.125 88.290 88.300 -0.920 3.959 5/15/2042 3.000 86.310 87.000 -0.912 3.972 2/15/2043 3.125 88.054 88.064 -0.248 3.986 5/15/2044 3.375 91.040 91.050 -0.274 3.996 8/15/2045 2.875 83.114 83.124 -0.966 4.001 2/15/2046 2.500 77.220 77.230 -0.954 3.989 8/15/2047 2.750 81.052 81.062 -1.000 3.955 11/15/2048 3.375 91.110 91.120 -1.034 3.909 8/15/2049 2.250 73.024 73.034 -1.002 3.884 5/15/2050 1.250 56.144 56.154 -0.946 3.839 2/15/2051 1.875 66.104 66.114 -0.968 3.848 11/15/2052 4.000 103.110 103.130 -1.074 3.807

Problem 8-14 Using Treasury Quotes Locate the Treasury bond in Figure 8.5 maturing in August 2040. Assume a par value of $20,000. a. What is its coupon rate? (Enter your answer as a percent rounded to 3 decimal places, e.g., 32.161.) b. What is its bid price in dollars? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What was the previous day's asked price in dollars? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Coupon rate b. Bid price c. Previous day's asked price %

Question 5  The March 2024 S&P 500 cash index is 930 while the S&P 500 futures index is 950 and  the contract value of each index point is $100. You are convinced the futures market will  rise 10% by expiry. You are only prepared to buy or sell one futures contract.  (i) Will you buy or sell a contract in the futures market? (2 marks)  (ii) What is your profit (+) in dollars if you are correct? (2 marks)  (iii) What is your profit (+)/loss (-) if the futures price on expiry is 1200? (2 marks)  (iv) What is your profit (+)/loss (-) if the futures price on expiry is 700? (2 marks)  (v) Explain what is meant by “initial margin” on a futures contract. (2 marks)

Problem 6-16 Expectations hypothesis and interest rates (LO6-4] Using the expectations hypothesis theory for the term structure of interest rates, determine the expected return for securities with maturities of two, three, and four years based on the following data. (Input your answers as a percent rounded to 2 decimal places.) Interest Rate 1-year T-bill at beginning of year 1 1-year T-bill at beginning of year 2 1-year T-bill at beginning of year 3 1-year T-bill at beginning of year 4 5% 78 9% 11% Expected Return 2-year security 3-year security 4-year security % %