Name: ____________________________

Eco 342 Banking and Financial Markets           Homework #5             Due 4/23/2004

1. What are the key distinctions between a private placement and a public offering in the primary market?

2. Consider a 10-year inflation indexed Treasury note issued with a coupon rate of 2%, semiannual coupon payments, and a face value of $10,000.  If inflation is 1.8% in the first year after issue and is 1.5% during the second year after issue, what be the adjustment to the face value and coupon payments after year 1 and year 2?  (Give me numerical answers)

3. Consider a Treasury bill with 180 days to maturity, a face value of $10,000 and a discount yield of 2%.  Calculate the price and yield to maturity for this bond.

4. Describe in your own words the difference between an underwriting arrangement and a best efforts arrangement in the primary market.

5. Describe the basic tradeoff between a competitive and noncompetitive bid in a Treasury auction.