Question
Floating-rate bonds are designed to minimise which of
the following risks?Solution
Floating Rate Bonds (FRBs) are bonds that have a variable coupon, equal to a money market reference rate (like MIBOR or LIBOR) plus a quoted spread (i.e., quoted margin). · Floating rate bonds allow the investor to earn a rate of interest income tied to current interest rates. As such, FRBs carry little interest rate risk. · Its price shows very low sensitivity to changes in market interest rates. When market rates rise, the expected coupons of the FRB increase in line with the increase in forward rates, which means its price remains constant. Thus, FRBs differ from fixed rate bonds, whose prices decline when market rates rise. As FRBs are very less sensitive to interest rate risk, they are considered conservative investments for investors who believe market rates will increase.
The probability of getting a total of 7 on two dice thrown together is:
For the random variable X with probability density function f(x) = (x−3)2 /5; x = 3, 4, 5, the variance of X is:
If the sum of lower and upper qualities is 6 and quartile deviation is 1.5, then the value of coefficient of quartile deviation is
For frequency distribution presentation , which option is wrong.
If the third quartile of the following data set 7,10,7,8,9 is 9.5, then the value of quartile deviation is:
For the cumulative distribution function
the upper quartile point is
The mean deviation from an average A will be minimum, if A represents:
If the first, second and third moment about origin are 2, 8 and 14. respectively, then Karl Pearson gamma coefficient of skewness y1 is: