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Financial Products in .NET Draw bar code 39 in .NET Financial Products




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Financial Products using barcode implement for .net vs 2010 control to generate, create code-39 image in .net vs 2010 applications. Microsoft Visual Studio (ii) If th visual .net Code 3 of 9 e bond defaulted on 28 November 2007 and the recovery value was 45%, describe the payments on 28 November 2007. 4.

The republic of Beelzebub has experienced many years of internal upheaval. A government-backed ten-year zero coupon bond yields 9.16%.

Then a new government takes power. Susan feels that a period of greater stability lays ahead and that the spread over a US government rate will be reduced. A US government ten-year zero coupon bond is yielding 4.

08%. Susan enters a six-month credit spread option on a $5 000 000 bond with a strike spread of 0.0508.

(i) Describe the pay-off. (ii) Six months later, the Beelzebub bond is selling for $43.76 per $100 of face value and the US government bond is yielding 4.

10%. The duration of the Beelzebub bond is 9.2 years.

Calculate the pay-off. 5. Explain how a junk bond (credit rated BB or lower) can be repackaged as an A-rated bond.

6. (i) What is a collateralised bond obligation (ii) Why does the senior tranche in a CBO have a high credit rating (iii) Why might a bank setting up a CBO keep the bonds in the equity tranche (iv) Explain why a low default correlation between issuers of the bonds (debts) in the portfolio leads to a high credit rating for the higher tranches. (v) Why might a bank set up a CDO based on a portfolio of loans .

Solutions Solutions 1 1. 3.938% 2.

3.732% 3. 5.

870% 4. 4.778% 5.

5.069% 6. 8.

16%, 7.844% 7. 6.

4% compounded daily. 8. (i) (ii) (iii) (iv) AAABank: FriendlyBank: InvestandGrow: MoneyValue: 25 541.

67 25 521.20 25 505.84 25 523.

26 (ii) 5.5% compounded quarterly..

9. (i) 5.6 .

NET Code 3/9 % compounded semi-annually, 10. 81.25 11.

5605 days. 12. (i) 4408.

30 (ii) 9690.03. (iii) 7298808.37. Financial Products 13. $89 58 3.41 14.

12 781.13 15. 7427.

65 16. 6.68% compounded monthly.

17. $52 061.06 18.

1.77168% 19. 7.

1085% 20. Buy in London at 7.38.

Sell in NY for 7.4028. No transaction costs.

21. Buy 1 000 000 yen in London for 5000. Sell in Frankfurt for 5035.

Heavy buying in London and selling in Frankfurt will cause the price differential to disappear. 22. In Moscow, spend 27.

98 RUB and buy $1. Sell this dollar in NY for 29.9145 RUB.

This is an arbitrage opportunity. 23. In the absence of transaction costs and assuming the prices remain as described, this is an arbitrage opportunity.

Risk-free pro t = 841.53. 24.

Do not buy the bond. Sell this bond for 95.50.

Invest 95.50 for nine months at 6.53%.

In nine months time receive 100.22. Pay 100 to the bond holder.

Pro t = 0.22. 25.

(i) (a) If 1 is changed: pounds yen euro pounds, the product gives the value of 1 at the end of this chain. (b) 1.00043.

There is an arbitrage opportunity in buying pounds, changing currencies as shown in the chain and selling pounds at the end of the chain. (ii) (a) Buy pounds. Change currencies as shown in the chain.

Sell pounds at the end of the chain. (b) Do nothing..

Solutions 1 1 (c) If abc < 1, a b 1 > 1. Then as above (reversed). Buy pounds.

c Pounds euros yen pounds. Sell pounds..

26. Suppos .NET Code 39 Full ASCII e not.

Investor A borrows the amount needed today to buy the portfolio at the lower price. The amount borrowed must (or an arbitrage opportunity will arise) increase in value to the value of the portfolio at maturity. Investor B borrows enough to buy at the higher price.

This loan must also increase in value until at maturity it matches the value of the portfolio. But at maturity, the portfolios have equal value. Contradiction.

27. (i) 2 , 5 7 7 (ii) 2 [ 4000 2.5 + 8000] + 5 [ 8000 2 + 4000] = 0 7 7 5 (iii) BB wins.

(iv) BB: 2 to 1 against (probability 1 ). 3 SI: 2 to 1 on (probability 2 ). 3 29.

(i) 6.65476% (ii) 7.4701%.

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