{"id":347,"date":"2015-06-19T08:01:43","date_gmt":"2015-06-19T08:01:43","guid":{"rendered":"http:\/\/assignmenttask.com\/tutorhelp\/?p=347"},"modified":"2022-10-15T05:52:30","modified_gmt":"2022-10-15T05:52:30","slug":"financial-modelling-assignment-help","status":"publish","type":"post","link":"https:\/\/assignmenttask.com\/tutorhelp\/financial-modelling-assignment-help\/","title":{"rendered":"FINANCIAL MODELLING ASSIGNMENT HELP"},"content":{"rendered":"

ACST201 Financial Modelling<\/p>\n

Question 1 [4 marks]
\nLinze bought a $1 000 000 90-day bank bill on 5 August 2014 at a yield of
\n2.65% p.a. He sold the bond on 17 October 2014 at a yield of 2.71% p.a.
\na. [2 marks] What is Linze\u2019s annualised yield over this holding period?
\nb. [2 marks] Decompose Linze\u2019s dollar yield on this transaction into an
\ninterest rate component and a capital gain\/loss component.
\nQuestion 2 [5 marks]
\nIn OLQ2 and GSPT1 you did numerous duration calculations for a variety
\nof bonds. Examining your results, explain how your results illustrate the
\nfollowing claims (from slides 41\u201342 of your week 06 lecture).
\na. [1 mark] For two bonds with the same coupon rate and yield to maturity,
\nthe one with the longer term to maturity has a higher duration.
\nFor two bonds with the same term to maturity and yield to maturity,
\nthe one with the lower coupon rate has a higher duration.
\nb. [1 mark] For two bonds with the same term to maturity and coupon
\nrate, the one with the lower yield to maturity has a higher duration.
\nFor two bonds with the same coupon rate and yield to maturity, the
\none with the shorter term to maturity has a lower duration.
\nc. [1 mark] For two bonds with the same term to maturity and yield to
\nmaturity, the one with the higher coupon rate has a lower duration.
\nFor two bonds with the same term to maturity and coupon rate, the
\none with the higher yield to maturity has a higher duration.
\nGordo, the owner of a gold mine, estimates the net cash flow from his mining
\noperations will be as follow.
\nTime (years) Net cash flow ($)
\n1 500 000
\n2 400 000
\n3 300 000
\n4 200 000
\n5 100 000
\nd. [2 marks] Calculate the duration of the project at an interest rate of 4% p.a.<\/p>\n

Question 3 [12 marks]
\nIn the distant land of Imbroglio, Syed is considering buying corporate bonds.1
\nHe has formed the view that there is a constant probability of default of 0.075
\nin any half year. Syed knows that if the bond defaults he will receive no
\nfurther payments at all from the bond.
\na. [3 marks] Draw a detailed contingent cash flow diagram, from Syed\u2019s
\nperspective, that models the possible financial outcomes.
\nb. [3 marks] What price should Syed pay for a 5-year 6% bond to earn
\na yield of 8% p.a.? Carefully set out all your working.
\nPrior to Syed\u2019s purchase, the government of Imbroglio introduces a program
\nof quantitative easing. Syed\u2019s analysis of the program suggests that, for
\nthose firms that default in the next six months, each will have a probability
\nof recovering and paying coupon of 0.5 (and 0.5 of remaining in default) in
\nthe next six month period. Thereafter, the program will have no effect, and
\nall defaulting firms will remain in default. The probability of a solvent firm
\nmoving into default remains at 0.075.<\/p>\n

c. [3 marks] Draw a detailed contingent cash flow diagram, from Syed\u2019s
\nperspective, that models these revised possible financial outcomes.
\nd. [3 marks] What price should Syed pay for a 5-year 6% bond to earn
\na yield of 8% p.a. under these new circumstances? Carefully set out
\nall your working.
\nQuestion 4 [8 marks]
\nJohno, a jeweller, has won the contract from the NRL to design and build a
\nnew trophy. He will need a kilogram of gold on 1 March 2015 to start work
\non his project. Johno\u2019s daughter is doing the HSC at the moment, and he\u2019s
\ngot marital problems. He\u2019s got enough stress in his life, and is worried that
\nthe price of gold will rise over the next few months.
\nGordo, a gold miner, will easily have this supply of gold available for
\nsale on 1 March 2015.<\/p>\n

Silvio, Johno\u2019s brother-in-law, runs a security firm. He is able and willing
\nto store gold for Johno for no cost\u2014and at no risk of loss or theft.
\nJohno is aware that he could buy the gold forward\u2014that is, negotiate a
\nprice now with Gordo for the delivery of the gold on 1 March 2015. Then
\nhe wouldn\u2019t have to worry about any rises on the price of gold over the next
\nfew months.<\/p>\n

a. [3 marks] By using two carefully labelled cash flow diagrams in your
\nanswer, setting out the cash flows associated with the forward contract
\nand the replicating portfolio, explain how you can determine the
\narbitrage-free forward price of gold for the forward contract between
\nJohno and Gordo.
\nIn your solution, take the current date as 23 October 2014 and the
\ncurrent price of gold per kilo as AUD$45 561.78. Also, take the current
\nsimple interest rate for all loans up to 180 days duration as 2.9% p.a.
\nJohno and his wife have just had a huge row, and have decided to get
\ndivorced. Silvio is not speaking to Johno any more, so Johno will have to
\nre-price his forward contract.
\nb. [6 marks] Using the details given above, but now factoring in a cost
\nof secure storage of $50 for terms up to 180 days, and an insurance
\ncost of $20, repeat a. above.<\/p>\n

Question 5 [0 marks]
\nConsider the following floating rate bond: it has a face value of $100. Each
\nhalf year it pays coupon based on the current market returns over the half
\nyear that has just ended. That is, if the market returns 3% from 15 January
\nto 15 July then the bond pays $3.
\nThe bond matures in 10 years\u2019 time, at which point the $100 face value
\nis returned to the purchaser.
\nHow much would you pay for this floating rate bond? Why?<\/p>\n

 <\/p>\n

To get assignment help, please contact to our live chat adviser<\/strong><\/p>\n

\"chat<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

ACST201 Financial Modelling Question 1 [4 marks] Linze bought a $1 000 000 90-day bank bill on 5 August 2014 at a yield of 2.65% p.a. He sold the bond on 17 October 2014 at a yield of 2.71% p.a. Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[346],"tags":[6,348,349,226,11,10],"class_list":["post-347","post","type-post","status-publish","format-standard","hentry","category-finance","tag-australia","tag-finance-assignment-help","tag-financial-modelling","tag-homework-help","tag-uk","tag-usa"],"_links":{"self":[{"href":"https:\/\/assignmenttask.com\/tutorhelp\/wp-json\/wp\/v2\/posts\/347","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/assignmenttask.com\/tutorhelp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttask.com\/tutorhelp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttask.com\/tutorhelp\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttask.com\/tutorhelp\/wp-json\/wp\/v2\/comments?post=347"}],"version-history":[{"count":2,"href":"https:\/\/assignmenttask.com\/tutorhelp\/wp-json\/wp\/v2\/posts\/347\/revisions"}],"predecessor-version":[{"id":1108,"href":"https:\/\/assignmenttask.com\/tutorhelp\/wp-json\/wp\/v2\/posts\/347\/revisions\/1108"}],"wp:attachment":[{"href":"https:\/\/assignmenttask.com\/tutorhelp\/wp-json\/wp\/v2\/media?parent=347"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttask.com\/tutorhelp\/wp-json\/wp\/v2\/categories?post=347"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttask.com\/tutorhelp\/wp-json\/wp\/v2\/tags?post=347"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}