A. Yield to Call Find the yield to call for a 7% coupon, $1,000 par 15…

A. Yield to
Call Find the yield to call for a 7% coupon, $1,000 par 15
year bond selling at $1020.55 if the bond is callable in 10 years
at a call price of $1,070. The bond makes semiannual coupon
payments.

B. Exotic Contracts A contract where the seller
of the contract collects an annual premium (and sometimes an
upfront fee) from the buyer and in exchange the seller of the
contract pays the drop in value from par to the buyer if a security
defaults is called a
C. The Term Structure Which of the following
result from the expectations theory of the yield curve?
I. The observed long-term rate includes a risk premium
II. Long term rates are a function of expected future short term
rates
III. An upward slope means that the market is expecting higher
future short term rates
IV. The observed yield curve is above the pure expectations yield
curve.
I only
I and II only
II and III only
II, III and IV only