清华大学金融工程（英文）本科试卷答案.docVIP

Answer to Exam A currency swap has a remaining life of 15 months. It involves exchanging interest at 14% on 20 million pound for interest at 10% on $30 million once a year. The term structure of interest rates in both the UK and the US is currently flat, and if the swap were negotiated today the interest rates exchanged would be 8% in dollars and 11% in pound. All interest rates are quoted with annual compounding. The current exchange rate (dollars per pound) is 1.65. What is the value of the swap to the party paying pound sterling? What is the value of the swap to the party paying dollars? Value to the party paying pound= =32.92-1.65*22.74 =32.92-37.52 =$ Million Value to the party paying dollars=$4.60 million A financial institution has entered into an interest rate swap with company X. Under the terms of the swap, it receives 10% per annum and pays six-month LIBOR on a principal of $10 million for five years. Payments are made every six months. Suppose that company X defaults on the sixth payment date (end of year three) when the interest rate (with semiannual compounding) is 8% per annum for all maturities. What is the loss to the financial institution? Assume that six-month LIBOR was 9% per annum halfway through year three. Loss to the financial institution: =10.86-10.45=0.41 million You are given the following information on two securities, the market portfolio, and the risk free rate: Expected Return Correlation with Market Portfolio Standard Deviation Security 1 15.5% 0.9 20% Security 2 9.2 0.8 9% Market portfolio 12.0% 1.0 12.0% Risk free rate 5.0% 0.0 0.0 Draw the SML. What are the betas of the two securities? Plot the two securities on the SML. On the basis of the risk and return relationships of the CAPM, supply values for the seven missing numbers in the following table: Security Expected Return Beta Standard Deviation Non-market Risk () A 13.4% 0.8 90.51% 0.81 B 19.0% 1.5 62.64% 0.36 C 15.0% 1 12% 0 D 7