Question 1 Day 1 2 3 4 Advances 1023 1245 2460 2509 Declines 2334 2004 1178 980 Volume Advancing(m) 214349 225066 666012

Question 1

Day

1

2

3

4

Advances

1023

1245

2460

2509

Declines

2334

2004

1178

980

Volume Advancing(m)

214349

225066

666012

679332

Volume Declining(m)

616678

555010

198058

172311

Yield on Top Rated bond

6.80%

6.70%

6.70%

6.60%

Yield on Intermediate-grade bond

7.40%

7.40%

7.50%

7.60%

What is the trin ratio for day 1?(sample answer: 1.35)

What is the trin ratio for day 4? (sample answer: 1.35)

Does the change in the trin ratio from day 1 to day 4 show a bullish or bearish trend? (sample answer: bullish or bearish)

Question 2

As a financial analyst at Wells Fargo, you are analyzing how the change in yield impacts the bond price. A bond has a duration of 11 years, a yield of 10%, a convexity of 140, and a market price of $1,000. Suppose the market yield increases by 60 basis points.
What is the percentage change in the bond’s price by the duration only formula?  (sample answer: 2.25% or -2.25%)
What is the bond price after the yield change predicted by the duration only formula?   (sample answer: $1050.65)
What is the percentage change in the bond’s price predicted by the duration with convexity formula?   (sample answer: 2.25% or -2.25%)
What is the bond price after the yield change predicted by the duration with convexity formula?  (sample answer: $1050.65)

Question 3

You have collected the following cash flow data of Herman Miller Office Furniture for the year ended December 31, 2019

Sale of a used Bus

45450

Cash dividend

90000

Purchase of land

28280

Interest payment on debt

26260

Cash Payment on Salary

90900

Purchase of a New Drilling machine

76760

Purchase of New Wood working machine

60000

Repurchase of stock

75000

Cash payments t








Question 1





Day


1


2


3


4




Advances


1023


1245


2460


2509




Declines


2334


2004


1178


980




Volume Advancing(m)


214349


225066


666012


679332




Volume Declining(m)


616678


555010


198058


172311




Yield on Top Rated bond


6.80%


6.70%


6.70%


6.60%




Yield on Intermediate-grade bond


7.40%


7.40%


7.50%


7.60%




What is the trin ratio for day 1?(sample answer: 1.35)
What is the trin ratio for day 4? (sample answer: 1.35)
Does the change in the trin ratio from day 1 to day 4 show a bullish or bearish trend? (sample answer: bullish or bearish)


Question 2

As a financial analyst at Wells Fargo, you are analyzing how the change in yield impacts the bond price. A bond has a duration of 11 years, a yield of 10%, a convexity of 140, and a market price of $1,000. Suppose the market yield increases by 60 basis points.
What is the percentage change in the bond’s price by the duration only formula?  (sample answer: 2.25% or -2.25%)
What is the bond price after the yield change predicted by the duration only formula?   (sample answer: $1050.65)
What is the percentage change in the bond’s price predicted by the duration with convexity formula?   (sample answer: 2.25% or -2.25%)
What is the bond price after the yield change predicted by the duration with convexity formula?  (sample answer: $1050.65)






Question 3

You have collected the following cash flow data of Herman Miller Office Furniture for the year ended December 31, 2019





Sale of a used Bus


45450




Cash dividend


90000




Purchase of land


28280




Interest payment on debt


26260




Cash Payment on Salary


90900




Purchase of a New Drilling machine


76760




Purchase of New Wood working machine


60000




Repurchase of stock


75000




Cash payments t

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