Exam 7: Interest Rates Forwards and Futures

A Forward Rate Agreement contains an agreed interest rate of 3.1% on a 6-month loan. If settled in arrears, what amount would the borrower pay or receive on an $800,000 loan if the prevailing 6-month interest rate is 3.6%?

What is the rationale behind cheapest-to-deliver calculations and why do we perform such calculations?

Which of the following items will a short bond futures position be most interested in at expiration of the futures contract?

A Forward Rate Agreement contains an agreed interest rate of 3.1% on a 6-month loan. If settled at the time of borrowing, what amount would the borrower pay or receive on a $500,000 loan if the prevailing 6-month interest rate is 2.9%?

What is the pure yield curve and why is it common to present coupon-based yield curves in practice?

The change in a bond price for a unit change in the prevailing yield is calculated as $198.54. What is the price value of a basis point on this bond?

Why can repos be used to simulate borrowing?

A 4-year bond with a price of 100.696 exists. The duration on the bond is 3.674. If the yield rises from 5.8% to 6.2%, what is the new bond price as estimated by the duration?