Q.1:  If a government bond is expected to mature in two years and  has a current price of $950, what is the bond’s YTM if it has a par value of $1,000 and a promised coupon rate of 10 percent? Suppose this bond is sold one year after purchase for a price of $970. What would this investor’s holding period yield be?  [1.5 Marks]

Q2. A 20-year U.S. Treasury bond with a par value of $1,000 is currently selling for $1,025 from various securities dealers. The bond carries a 6 percent coupon rate with payments made annually. If purchased today and held to maturity, what is its expected yield to maturity? [1.5 Marks]

Q 3. How can the discipline of the marketplace be used as a guide for making liquidity management decisions? Explain.[2 Marks- 500 words minimum]

Q4.Briefly discuss the following:                             Liability Management Highly Rate-Sensitive Volatile:

Note: You are required to reply to at least two peer responses to this week’s discussion question. Your replies need to be substantial and constructive in nature

Peer responses:

1-

• Liabilities are highly rate sensitive as most liabilities are linked to floating rates
• If interest rates rise, liabilities payables also rise
• Interest on Current Liabilities increase with rise in interest rates
• Interest payable on term loans, cash credit, overdraft, dropline overdraft are all floating in nature; hence, payables increase with increasing rates
• Payables on Quasi Equity, ie, Unsecured Loans is always linked to variable rates

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