BMGT 110 Study Guide - Midterm Guide: Public Service Association, Credit Crunch, Amortization Schedule

• School: University of Maryland
• Department: Business and Management
• Course: BMGT 110
• Professor: markwellman

Document Summary

Modified duration: duration measures risk, giving us a close approximation of how much price changes for a small yield change. Worked in 4 markets: salomon bought in the when-issued market at market yields. Salomon illegally controlled the auction in the primary market by bidding lower yields than the market and buying in customers(cid:495) names. Market at special rates, reinvesting the cash they borrowed at a higher rate. Salomon sold off the security in the security. Market at a slow rate, to minimize price impact. Unauthorized customers bids brought number up to 94% of competitive bids. They had bought heavily in the when-issued market so they controlled close to 150%. Salomon claimed profits of . 4m but most likely false because the market lost m. Curve and forward rates: spot curve can be used to calculate forward rates. Forward rates can be used to discount any cash flow. Curve and spot rates: implied by the relationship with the spot curve.