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4.The following table provides the quoted price and terms for three separate treasury bonds

Bond Quoted bond price Bond terms

1 $152 Time-to-maturity = 20 years

Coupon = 14% per annum (payable semi-annually)

2 $140 Time-to-maturity = 25 years

Coupon = 12% per annum (payable semi-annually)

3 $124 Time-to-maturity = 30 years

Coupon = 10% per annum (payable semi-annually)

The quoted futures price is $78.

(a) What are the conversion factors for the above three bonds?

(b) What is the cheapest-to-deliver bond?






5. The cheapest-to-deliver bond in a Treasury bond futures contract is a 13% coupon bond, and the delivery is expected to be made 62 days from today. Coupon payments on the bond are made every six months and the last coupon was made 177 days back. The next coupon is due 5 days from today and the coupon after that will be due 188 days from today. The annual risk-free rate is 11.65% per annum. The conversion factor for the bond is 1.5. The current quoted bond price is $110. Calculate the quoted futures price for the contract.






6.Company A, a British manufacturer, wishes to borrow U.S. dollars at a fixed rate of interest. Company B, a U.S. multinational, wishes to borrow sterling at a fixed rate of interest. They have been quoted the following rates per annum (adjusted for differential tax effects):

Sterling U.S. dollars

Company A 11.0% 7.0%

Company B 10.6% 6.2%

Design a swap that will net a bank, acting as intermediary, 10 basis points per annum and that will produce a gain of 15 basis points per annum for each of the two companies.






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Ed Rivers, a third year medical student, was alone in the hospital emergency room (ER) one night. It was unusually quiet in the ER, so the residents were getting some much- needed sleep. A patient Ms. M.B. was brought in showing signs of serious dehydration. Ed tried to give her water, but she vomited. Feeling that he must do something else and not wanting to wake the residents, he administered 1 liter (L) of sterile distilled water intravenously (IV).

Work through each section one at a time. Once you feel you have mastered each section of the problem use your answers to help you summarize everything into a one to two page written report. Work on this as a group, but each person in the group needs to hand in their own typewritten report.

1. Predict the direction of change (increase, decrease, no change) you would expect Ed’s infusion to have produced in the listed parameters. Explain

a. Ms. M.B.’s plasma osmolarity after the infusion

b. Ms. M.B. RBC volume after the infusion equilibrates with blood.

2. The Volume of Ms. M.B., plasma was 3 L before Ed administered the IV. Assume that there was complete mixing of the administered water with her plasma, but no mixing with her interstitial fluid. Calculate Ms. M.B.’s plasma osmolarity after the infusion mixed with her plasma but before any water entered her RBC.

3. Assuming that Ms. M.B.’s RBC volume was 2 L before the IV was given. Calculate her plasma and RBC osmolarity after the infused water equilibrated between her plasma and her RBC. How much would her RBC volume change? (Again, assuming that there was no mixing with the interstitial fluid).

Ms. M.B. got worse after Ed’s treatment so the resident was called. She drew some blood from the patient and centrifuged it. The denser RBCs were forced to the bottom of the tube. The supernatant plasma was pink. The resident then decided to infuse a sucrose solution into the patient (The RBC membrane is impermeable to sucrose).

4. Why was the patient’ s plasma pink?

5. Had Ed given Ms. M.B. a sucrose solution instead of water, he might have helped her. What concentration sucrose solution should he have administered to leave the RBC volume unaffected?

The resident, knowing what Ed had done, infused the patient with 1 L of a 600 mM (i.e., 600 mOsm / L) sucrose solution. Recall that, after Ed’s treatment, the patient’s plasma was x (what you figured out above) L, her RBC volume was x (what you figured out above) L, and her osmolarity was x (what you figured out above) mOsm / L. Assume that this infusion equilibrated with Ms. M.B.’s plasma and RBCs.

6.Predict (increase, decrease, no change) the affect of the infusion given by the resident on the parameters listed. Explain.

a. Ms. M.B.’s RBC osmolarity

b. Ms. M.B.’s volume

7. Assuming that none of the administered fluid was excreted, calculate Ms. M.B.’s plasma osmolarity and RBC volume after the resident’s infusion had equilibrated with her plasma and RBC. (Again assume that no mixing takes place with interstitial fluid).

Ms. M.B.’s RBC osmolarity

Ms. M.B.’s volume

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