University of North Carolina – Chapel Hill
Kenan-Flagler Business School

BUSI 792A Investments

Quiz 1
Prof. Robert A. Connolly

January 2014

Your name: ___________________________

Your PID: ______________________

1. From the options below, select the primary sources of risk that help to understand yields on corporate bonds? (select all that are correct)
a)
b)
c)
d)
e)

business cycle risk default risk financial distress risk interest rate risk currency risk

2) The data in the table below is from the Wall Street Journal on January 24, 2014. Is the ask yield in the table in discount or yield-to-maturity basis? (choose one)
Maturity Bid
1/30/2014
2/6/2014
2/13/2014
2/20/2014
2/27/2014
3/6/2014
3/13/2014
3/20/2014
3/27/2014
4/3/2014
4/10/2014
5/1/2014
5/8/2014
5/15/2014
5/22/2014
5/29/2014

a) Discount
b) Yield-to-maturity

0.015
0.020
0.035
0.045
0.080
0.085
0.075
0.060
0.060
0.045
0.045
0.045
0.050
0.050
0.050
0.045

Asked
Chg
Asked yield
0.005
0.010
0.005
0.015
0.010
0.015
0.010
0.025
0.010
0.035
0.030
0.035
0.075
0.065
0.076
0.070
0.050
0.071
0.070
0.050
0.071
0.055
0.035
0.056
0.055
0.020
0.056
0.035
0.015
0.035
0.035
0.015
0.035
0.035
0.020
0.035
0.035
0.020
0.035
0.035
0.020
0.035
0.035
0.020
0.035
0.035
0.015
0.035

3) The data in the table below is from the Wall Street Journal on January 24, 2014. What would you expect the yield to be on A2P2 commercial paper with the same maturity as the TBill that matures on 5/15/2014? (circle one)
Maturity Bid
1/30/2014
2/6/2014
2/13/2014
2/20/2014
2/27/2014
3/6/2014
3/13/2014
3/20/2014
3/27/2014
4/3/2014
4/10/2014
5/1/2014
5/8/2014
5/15/2014
5/22/2014
5/29/2014

Asked
Chg
Asked yield
0.015
0.005
0.010
0.005
0.020
0.015
0.010
0.015
0.035
0.010
0.025
0.010
0.045
0.035
0.030
0.035
0.080
0.075
0.065
0.076
0.085
0.070
0.050
0.071
0.075
0.070
0.050
0.071
0.060
0.055
0.035
0.056
0.060
0.055
0.020
0.056
0.045
0.035
0.015
0.035
0.045
0.035
0.015
0.035
0.045
0.035
0.020
0.035
0.050
0.035
0.020
0.035
0.050
0.035
0.020
0.035
0.050
0.035
0.020
0.035
0.045
0.035
0.015
0.035

a) About the same
b) Lower
c) Higher
4) The data in the table below is from the Wall Street Journal on January 24, 2014. For the note maturing on 02/27/2014, what was its bid price on 02/26/2014?
Maturity Bid
1/30/2014
2/6/2014
2/13/2014
2/20/2014
2/27/2014
3/6/2014
3/13/2014
3/20/2014
3/27/2014
4/3/2014
4/10/2014
5/1/2014
5/8/2014
5/15/2014
5/22/2014
5/29/2014

Asked
Chg
Asked yield
0.015
0.005
0.010
0.005
0.020
0.015
0.010
0.015
0.035
0.010
0.025
0.010
0.045
0.035
0.030
0.035
0.080
0.075
0.065
0.076
0.085
0.070
0.050
0.071
0.075
0.070
0.050
0.071
0.060
0.055
0.035
0.056
0.060
0.055
0.020
0.056
0.045
0.035
0.015
0.035
0.045
0.035
0.015
0.035
0.045
0.035
0.020
0.035
0.050
0.035
0.020
0.035
0.050
0.035
0.020
0.035
0.050
0.035
0.020
0.035
0.045
0.035
0.015
0.035

Calculate and fill in the blank with your answer. Round to the nearest cent.
5) The following data on Treasury Notes and Bonds data is from the Wall Street Journal on
January 24, 2014. In what form is the ask yield in the table below quoted? (circle one)
Maturity Coupon Bid
Asked
Asked yield
2/15/2014
1.250 100.0547 100.0625
0.039
2/15/2014
4.000 100.1953 100.2031
0.065
2/28/2014
0.250 100.0078 100.0156
0.073
2/28/2014
1.875 100.1484 100.1563
0.106
3/15/2014
1.250 100.1328 100.1484
0.106
3/31/2014
0.250 100.0078 100.0234
0.114
3/31/2014
1.750 100.2578 100.2813
0.124
4/15/2014
1.250 100.2422 100.2578
0.047
4/30/2014
0.250 100.0391 100.0547
0.037
4/30/2014
1.875 100.4531 100.4688
0.050
5/15/2014
1.000 100.2734 100.2813
0.057
5/15/2014
4.750 101.3828 101.3984
0.061
1/31/2015
2.250 102.1094 102.1250
0.146

a)
b)
c)
d)

Maturity Coupon Bid
Asked
Asked yield
2/15/2015
0.250 100.0859 100.0938
0.161
2/15/2015
4.000 104.0234 104.0313
0.162
1/15/2016
0.375 100.0156 100.0234
0.363
1/31/2016
2.000 103.2344 103.2578
0.372
2/15/2016
0.375 99.9609 99.9688
0.390
2/15/2016
4.500 108.4063 108.4297
0.372
2/15/2016
9.250 118.0781 118.1016
0.384
1/15/2017
0.750 100.0234 100.0625