Risk management and derivatives test 1|Essay guru

Posted: January 28th, 2023

Question 1

The yield curve is currently flat at 7%. Based on the following information, price a bond with annual coupons, a face value of $100.00 with a

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a. 10% coupon rate and maturity in 2 years.

b. 5% coupon rate and maturity in 2 years.

 

 

Question 2

A bank quotes an interest rate of 14% per annum with quarterly compounding. What is the equivalent rate with?

a) Continuous compounding, and

b) Annual compounding?

SOLUTION

Risk management is the process of identifying, assessing, and prioritizing potential risks to an organization, and implementing strategies to mitigate or minimize their impact. This can include financial risks, operational risks, compliance risks, and reputational risks.

The goal of risk management is to minimize the negative impact of risks on an organization, while maximizing opportunities for success. Techniques for risk management include risk assessment, risk control, and risk financing

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