Chapter 2

Question 1

Suppose PHP 1,000 is invested in an instrument that pays either 3% simple
interest or 3% interest compounded semi-annually. How much will the investment be
after 2 years?

Question 2

How much should be invested in an account earning 5% simple interest or 5%
interest compounded quarterly so that the value after 2 years is PHP 2,000?

Question 3

Principal
Tenor
Issue Date
Maturity Date
Coupon Rate
Coupon Frequency
:
:
:
:
:
:
PHP 100,000.00
5 years
[●]
[●]
6.00% p.a. (subject to 20% W/Tax)
Quarterly

Question 4

A 30 year bond is paying a 7% coupon and is currently
priced at face value. What is the current yield on the
bond?

Question 5

If the above bond’s price falls to $980, what happens to
the yield? Does it increase or decrease?

Question 6

If the bond’s price now increases to Php 1,100, what
happens to the yield? Does it increase or decrease?

Question 7

Find the price today of a 10-year bond assuming 1,000 in face amount, a
coupon rate of 5% payable semi-annually, and having a current yield of 6%.

Question 8

The quoted (clean) price of a government bond is $120. Suppose the bond
bears a coupon rate of 5% payable semi-annually. Assuming that the bond has a face
amount of $100 and matures on 20 December 2023, what is the dirty price today
(September 20) of the bond? For simplicity, assume that there are 360 days in a year.