1. A loan has the following features:

• Amount borrowed - USD 100 million

• Interest rate - 3% per annum

• Arrangement fee (to be paid upfront) – 2% of the loan value

• Repayment terms – full amount to be repaid at the end of the loan period

Calculate the total cost of a five-year loan with these features:

a)      3.2%

b)      3.0%

c)      2.9%

d)      3.4%

2. Calculate the accrued coupon for a bond traded on 31st March with the following features: Nominal value – USD 1’000; Coupon rate – 5%; Coupon payment – once a year, on 31st December

a)      USD 50.00

b)      USD 12.33

c)      USD 12.50

d)      USD 15.00

e)      None of the above

3. Suppose a seven-year USD 1’000 bond with an 8% annual coupon rate and semi-annual coupon payments is trading with a yield to maturity (YTM) of 6.75%. Is this bond currently trading at a discount, at par, or at a premium to face value?

a)      The bond is trading at a premium to par value

b)      The bond is trading at par

c)      The bond is trading at a discount to par value

d)      More information is needed to answer

4. Suppose a 10-year USD 1’000 bond with a coupon rate of 5% (annual coupon payments) is currently trading at a price of USD 1’100 (clean price). What is the bond’s yield to maturity?

a)      5.00%

b)      4.37%

c)      3.38%

d)      3.78%

5. Suppose a seven-year USD 1’000 bond with an 8% annual coupon rate and semi-annual coupon payments is trading with a yield to maturity (YTM) of 6.75%. Calculate the estimated bond value. Note: as the bond pays semi-annual coupons, it is important to compute cash flows over 6-months periods, not annual ones. Semi-annual coupons are half of yearly coupons.

a)      $1,075

b)      $1,076

c)      $1,098

d)      $1,099

e)      More information is needed to answer