1. If a $1,000 par value bond has a coupon rate of 7% with interest paid semi-annually, a maturity of 18 years, and a current price of $1,235, what is the ANNUAL yield-to-maturity of this bond? A) 4.3% B) 5.0% C) 6.4% D) 2.5%

2. A stock portfolio designed to mimic a market index but with fewer stocks will likely have less tracking error if it has a 22) A) beta of 1 and a high R2 B) beta of 0 and a low R2 C) beta of 1 and a low R2 D) beta of 0 and a high R2

3. The risk free rate is 1.5%. The strike price of a call is 72.50. The current stock price is 73. The stock with be either 76 or 68 in the future. Apply the delta method to find ... the delta for a call option... value of the call option today... value of a put option ...

4. You want to construct a portfolio containing equal amounts of U.S. Treasury bills and two stocks. If the beta of the first stock is 1.23 and the beta of the portfolio is 1.0, what does the beta of the second stock have to be?

A) 1.77

B) 0.77

C) 1.23

D) 0.23

5. What is the duration of a $1,000 par value bond with a coupon rate of 6%, a yield-tomaturity of 5%, and 2 years left to maturity? (Interest payments are made semi-annually.)

Please show your work.