1. Spot rates can be calculated as geometric averages of implied forward rates.

a. True

b. False

2. SHOW WORK If the six –month spot rate is 4% and the one-year spot rate is 4.4%, what is the six month forward six months hence:

a. 4%

b.  4.2%

c. 4.4%

d. 4.6%

e. 4.8%

f.  5.0%

3. If a floater is priced at a premium above par value, the quoted margin is greater than the discount margin.

a. True

b. False

4. When issuing debt , a company may use a sinking fund as a means of reducing:

a. Interest rate risk

b. Credit risk

c. Inflation risk

d. Reinvestment rate risk

1. What is the Z-spread? How is it calculated? What is the difference between the z-spread and the nominal spread? Discuss.