Question 1) Which of the following is applicable to corporate bonds in the United States?

1) Which of the following is applicable to corporate bonds in the United States?

A) Actual/360

B) Actual/Actual

C) 30/360

D) Actual/365

2) It is May 1. The quoted price of a bond with an Actual/Actual (in period) day count and 12% per annum coupon in the United States is 105. It has a face value of 100 and pays coupons on April 1 and October 1. What is the cash price?

A) 106.00

B) 106.02

C) 105.98

D) 106.04

3) It is May 1. The quoted price of a bond with a 30/360 day count and 12% per annum coupon in the United States is 105. It has a face value of 100 and pays coupons on April 1 and October 1. What is the cash price?

A) 106.00

B) 106.02

C) 105.98

D) 106.04

4) The most recent settlement bond futures price is 103.5. Which of the following four bonds is cheapest to deliver?

A) Quoted bond price = 110; conversion factor = 1.0400

B) Quoted bond price = 160; conversion factor = 1.5200

C) Quoted bond price = 131; conversion factor = 1.2500

D) Quoted bond price = 143; conversion factor = 1.3500

5) Which of the following is NOT an option open to the party with a short position in the Treasury bond futures contract?

A) The ability to deliver any of a number of different bonds

B) The wild card play

C) The fact that delivery can be made any time during the delivery month

D) The interest rate used in the calculation of the conversion factor

6) A trader enters into a long position in one Eurodollar futures contract. How much does the trader gain when the futures price quote increases by 6 basis points?

A) $6

B) $150

C) $60

D) $600

7) A company invests $1,000 in a five-year zero-coupon bond and $4,000 in a ten-year zero-coupon bond. What is the duration of the portfolio?

A) 6 years

B) 7 years

C) 8 years

D) 9 years

8) The modified duration of a bond portfolio worth $1 million is 5 years. By approximately how much does the value of the portfolio change if all yields increase by 5 basis points?

A) Increase of $2,500

B) Decrease of $2,500

C) Increase of $25,000

D) Decrease of $25,000

9) A portfolio is worth $24,000,000. The futures price for a Treasury note futures contract is 110 and each contract is for the delivery of bonds with a face value of $100,000. On the delivery date the duration of the bond that is expected to be cheapest to deliver is 6 years and the duration of the portfolio will be 5.5 years. How many contracts are necessary for hedging the portfolio?

A) 100

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