FIN 564 Week 1 Homework Problems

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Fin 564 Week One Assignment ( Chapter 2 1,2,18,19,26)

2.1 A particular security's equilibrium rate of return is 8 percent. For all
securities, the inflation risk premium is 1.75 percent and the real interest
rate is 3.5 percent. The security's liquidity risk premium is 0.25 percent
and the maturity risk premium is 0.85 percent. The security has no
special covenants.
Calculate the security's default risk premium. (LG 2-6)
2.2 You are considering an investment in 30-year bonds issued by
Moore Corporation. The bonds have no special covenants. The Wall
Street Journal reports that one-year T-bills are currently earning 3.25
percent. Your broker has determined the following information about
economic activity and
Moore Corporation bonds: (LG 2-6)
2.18 Calculate present value of $5,000 received five years from today if
your investments pay (LG 2-9)
2.19 What do your answers to these questions tell you about the relation
between present values and interest rates and between present values and
the number of compounding periods per year?
2.26 Compute the future values of the following first assuming that
payments are made on the last day of the period and then assuming
payments are made on the first day of the period:

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 FIN 564 Week 3 Homework Problems
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Chapter 12

6. a. Earning assets = investment securities + net loans

Chapter 13

2. To determine the deposit insurance assessment for each institution, we

set up the following tables.
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FIN 564 Week 5 Homework Problems

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CHAPTER 22
10. Use the following balance sheet information to answer this question

CHAPTER 23
4. Suppose that you purchase a Treasury bond futures contract at $95 per
$100 of face value.
a. What is your obligation when you purchase this futures contract?

15. An insurance company owns $50 million of floating-rate bonds

yielding LIBOR plus 1 percent. These loans are financed by $50 million
of fixed-rate guaranteed investment contracts (GICs) costing 10 percent.
A finance company has $50 million of auto loans with a fixed rate of 14
percent. They are financed by $50 million of debt with a variable rate of
LIBOR plus 4 percent. If the finance company is going to be the swap
buyer and the insurance company the swap seller, what is an example of
a feasible swap?

CHAPTER 24
8. Consider a GNMA mortgage pool with principal of $20 million. The
maturity is 30 years with a monthly mortgage payment of 10 percent per
year. Assume no prepayments.
a. What is the monthly mortgage payment (100 percent amortizing) on
the pool of mortgages?
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FIN 564 Week 6 Homework Problems

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FIN 564 Week 6 Homework Problems