FIN432 CSU Fullerton Risk Management & Interest Rate Questions

There are 7 questions in total.

Note: Please come up with the solving process and the formulas you used

The related class lectures are attached.

Question example:

1. A $1,000 six-year bond has an 8 percent coupon, is selling at par, and contracts to make annual payments of interest.The duration of this bond is 4.99 years.What will be the new price using the duration model if interest rates increase to 8.5 percent? Please show your calculation.

A)$23.10

B)$976.90

C)$977.23

D)$1,023.10

E)-$23.10

Answer:

2. What does each letter in the “CAMEL” system represent? Give an example of the financial ratios under each CAMEL category.