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63) You are interested in valuing a 2-year semi-annual corporate coupon bond using spot rates but there are no liquid strips available. However, you do find the following 4 comparable semi-annual bonds (below) maturing over the next 2 years. Use the bootstrapping approach to calculate the 18-month spot rate.

Time remaining to maturity Coupon Bond price 6 months 0.000% 99.000 1 year 1.250% 98.000 18 months 1.500% 97.000 2 years 1.250% 96.000

64) You are interested in valuing a 2-year semi-annual corporate coupon bond using spot rates but there are no liquid strips available. However, you do find the following 4 comparable semi-annual bonds (below) maturing over the next 2 years. Use the bootstrapping approach to calculate the 24-month spot rate.

Time remaining to maturity Coupon Bond price 6 months 0.000% 99.000 1 year 1.250% 98.000 18 months 1.500% 97.000 2 years 1.250% 96.000

65) What is the yield spread on a 5-year, 5% semi-annual coupon bond with priced at 97 while the same maturity benchmark treasury bond is a 2% semi-annual coupon treasury bond priced at 101?

66) A 3-year 5% semi annual coupon bond is priced at 103. Based on the following treasury spot rates, what is the Z-spread?

Term Spot Rate 6 month 2.020% 12 month 3.304% 18 month 3.577% 24 month 3.335% 30 month 1.230% 36 month 1.305%

67) A callable bond has an option adjusted spread (OAS) of 130bps, a z-spread of 180, and a yield spread of 185bps. If you believe the bond is accurately priced, which of the following statements is most accurate?

Investors are getting 50bps of compensation for call risk. Investors are getting 55bps of compensation for call risk. The issuer is getting 50bps of compensation for call risk. The issuer is getting 55bps of compensation for call risk.

68) You believe that 6 months from now, the 12-month treasury spot rate will be 7%. You believe that 1 year from now, the 6-month treasury spot rate will be 6.00%. Given the treasury spot rates below, which of the following strategies would generate the highest return?

Term Spot Rate 6-month 4.00% 12-month 4.20% 18-month 4.50% 24-month 4.90% 30-month 5.40% 36-month 5.70% 42-month 6.00% 48-month 6.40%

Invest in an 18-month treasury. Invest in a 12-month treasury, at maturity reinvest proceeds in a 6-month treasury. Invest in a 6 month treasury, at maturity reinvest proceeds in a 12-month treasury. You are indifferent between all 3 strategies.

69) You believe that 6 months from now, the 12-month treasury spot rate will be 7.00%. You believe that 1 year from now, the 6-month treasury spot rate will be 6.00%. You believe that 18 months from now, the 6-month treasury spot rate will be 5%. Given the treasury spot rates below, which of the following strategies would generate the highest return?

Term Spot Rate 6-month 4.00% 12-month 4.20% 18-month 4.50% 24-month 4.90% 30-month 5.40% 36-month 5.70% 42-month 6.00% 48-month 6.40%

Invest in an 18-month treasury. Invest in a 12-month treasury, at maturity reinvest proceeds in a 6-month treasury. Invest in a 6 -month treasury, at maturity reinvest proceeds in a 12-month treasury. Invest in a 24-month treasury but sell 6-month prior to maturity. You are indifferent between all 3 strategies.

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