When the investor’s investment horizon is less than the Macaulay duration of the bond she owns:

Section B – TWO questions ONLY to be attempted

GNT Co is considering an investment in one of two corporate bonds. Both bonds have a par value of $1,000 and pay coupon interest on an annual basis. The market price of the first bond is $1,079?68. Its coupon rate is 6% and it is due to be redeemed at par in five years. The second bond is about to be issued with a coupon rate of 4% and will also be redeemable at par in five years. Both bonds are expected to have the same gross redemption yields (yields to maturity).

GNT Co considers duration of the bond to be a key factor when making decisions on which bond to invest.

Required:

(a) Estimate the Macaulay duration of the two bonds GNT Co is considering for investment. (9 marks)

(b) Discuss how useful duration is as a measure of the sensitivity of a bond price to changes in interest rates. (8 marks)

4. Cambridge When we first come across Cambridge in written records, it was already a considerable town. The bridge across the River Cam or Granta, from which the town took its name, had existed since at least 875. The town was an important trading centre before the Domesday survey was compiled in 1086, by which time a castle stood on the rising ground to the north of the bridge, and there were already substantial commercial and residential properties as well as several churches in the main settlement which lay south of the bridge. Within the town, or very close to it, there were a number of other religious institutions. There had been canons in the Church of St Giles below the castle before 1112, when they moved to a new site across the River Cam at Barnwell, and the Convent of St Radegund had existed since 1135 on the site which eventually became Jesus College. There were also two hospitals, one reserved for lepers at Stourbridge, and a second, founded for paupers and dedicated to St John, which after 1200 occupied the site where St John's College now stands. Seventeen miles north of the town was the great Benedictine house of Ely which, after 1109, was the seat of a Bishopric. There was thus much to bring clerks (clergymen) to the town, but traders were also attracted to it. After about 1100 they could reach Cambridge easily by the river systems which drained the whole of the East Midlands, and through Lynn and Ely they had access to the sea. Much wealth accumulated in the town, and the eleven surviving medieval parish churches and at least one handsome stone house remain as evidence of this. There were food markets before 1066, and during the twelfth century the nuns of St Radegund were allowed to set up a fair on their own land at Garlic Lane; the canons of Barnwell had a fair in June (later Midsummer Fair), and the leper hospital was granted the right to hold a fair which developed into the well-known and long-lasting Stourbridge Fair. By 1200, Cambridge was a thriving commercial community which was also a county town and had at least one school of some distinction. Then, in 1209, scholars taking refuge from hostile townsmen in Oxford migrated to Cambridge and settled there. At first they lived in lodgings in the town, but in time houses were hired as hostels with a Master in charge of the students. By 1226 the scholars were numerous enough to have set up an organization, represented by an official called a Chancellor, and seem to have arranged regular courses of study, taught by their own members. From the start there was friction between the town and the students. Students, usually aged about fourteen or fifteen, often caused disturbances; citizens of the town, on the other hand, were known to overcharge for rooms and food. King Henry III took the scholars under his protection as early as 1231 and arranged for them to be sheltered from exploitation by their landlords. At the same time he tried to ensure that they had a monopoly of teaching, by an order that only those enrolled under the tuition of a recognized master were to be allowed to remain in the town. 8. Which of the following is TRUE according to the passage？

A、Cambridge was a big castle in the past.

B、scholars in oxford despised the scholars in Cambridge.

C、King Henry III gave little support to the scholars.

D、There were food markets before 1066.

Our ape-men forefathers had no obvious natural weapons in the struggle for survival in the open. They had neither the powerful teeth nor the strong【C1】______ of the big cats. They could not【C2】______ with the bear, whose strength, speed and claws【C3】______ an impressive "small-fire" weaponry. They could not even defend themselves【C4】______ running swiftly like the horses, zebras or small animals. If the ape-men had attempted to compete on those terms in the open, they would have been【C5】______ to failure and extinction. But they were【C6】______ with enormous concealed advantages of a kind not possessed by any of their competitors.

In the search 【C7】______ the pickings of the forest, the ape-men had【C8】______ efficient stereoscopic vision and a sense of colour that the animals of the grasslands did not possess. The ability to see clearly at close 【C9】______ permitted the ape-men to study practical problems in a way that lay far【C10】______ the reach of the original inhabitants of the grassland. Good long-distance sight was【C11】______ another matter. Lack of long-distance vision had not been a problem for'forest-dwelling apes and monkeys because the higher the viewpoint, the greater the range of sight- so【C12】______ they had to do was climb a tree. Out in the open, however, this simple solution was not【C13】______ Climbing a hill would have helped, but in many places the ground was flat. The ape-men【C14】______ the only possible solution. They reared up as high as possible on their【C15】______ limbs and began to walk upright.

This【C16】______ change of physical position brought about considerable【C17】______ .It was extremely unstable and it meant that the already slow ape-men became slower still.【C18】______ ,they persevered and their bone structure gradually became【C19】______ to the new, unstable position that【C20】______ them the name Homo erectus, upright man.

【C1】

A．claws

B．paws

C．hoofs

D．hands

Slavery has played a significant role in the history of the U. S. It existed in all the English mainland colonies and most of the Founding Fathers also had slaves, as did eight of the first 12 presidents.

Dutch traders brought 20 Africans to Jamestown, Virginia, as early as 1619, however, throughout the 17 th century the number of Africans in the English mainland colonies grew very slowly. At that time, colonists used two other sources of unfree labor: Native American slaves and European indentured servants.

During those years, every colony had some Native American slaves, but their number was limited. Indian men avoided performing agricultural labor, because they viewed it as women' s work, and colonists complained that they were too "haughty". The more important was that the settlers found it more convenient to sell Native Americans captured in war to planters in the Caribbean than to turn them into slaves, because they often resisted and it was not hard for the slaves to escape. Later, the policy of killing Indians or driving them away from white settlements was proposed and it contradicted with their widespread employment as slaves.

The other form. of labor was the white indentured servitude. Most indentured servants consisted of poor Europeans. Desiring to escape tough conditions in Europe and take advantage of fabled opportunities in America, they traded three to seven years of their labor in exchange for the transatlantic passage. At first, it was mainly English who were the white indentured servitude but later increasingly Irish, Welsh, and German joined. They were essentially temporary slaves and most of them served as agricultural workers although some, especially in the North, were taught skilled trades. During the 17th century, they performed most of heavy labor in the Southern colonies and also consisted of the bulk of immigrants to those colonies.

At the end of the 17 th century, in order to meet the labor need, landowners in America turned to African slaves. During the late 17th and 18th centuries, thanks to the dominant position of England in terms of naval superiority, English traders (some of whom lived in English America) transported millions of Africans across the Atlantic. And the transatlantic slave trade produced one of the largest forced migrations in history, blacks (the great majority of whom were slaves) increasing from about 7 percent of the American population in 1680 to more than 40 percent by the middle of the 18th century.

Which of the following was true of the slavery in America?

A．The colonists sold African Americans to planters in the Caribbean.

B．Native American slaves performed agricultural labor.

C．During the 17th century, the white indentured servitude was the main labor in the Southern colonies.

D．It was at the end of the 17th century that African people began to be brought to America.

For laymen ethnology is the most interesting of the biological sciences for the very reason that it concerns animals in their normal activities and therefore,if we wish,we can assess the possible dangers and advantages in our own behavioral roots. Ethnology also is interesting methodologically because it combines in new ways very scrupulous field observations with experimentation in laboratories. The field workers have had some handicaps in winning respect for themselves. For a long time they were considered as little better than amateur animal-watchers—certainly not scientists,since their facts were not gained by experimental procedures:they could not conform. to the hard-and-fast rule that a problem set up and solved by one scientist must be tested by other scientists, under identical conditions and reaching identical results. Of course many situations in the lives of animals simply cannot be rehearsed and controlled in this way. The fall flocking of wild free birds cant be,or the roving animals over long distances, or even the details of spontaneous family relationships. Since these never can be reproduced in a laboratory, they are then not worth knowing about? The ethnologists who choose field work have got themselves out of this impasse by greatly refining, the techniques of observing. At the start of a project all the animals to be studied are live-trapped,marked individually,and released. Motion pictures,often in color, provide permanent records of their subsequent activities. Recording of the animals voices by electrical sound equipment is considered essential,and the most meticulous notes are kept of all that occurs. With this material other biologists,far from the scene,later can verify the reports. Moreover, two field observers often go out together,checking each others observations right there in the field. Ethnology, the word, is derived from the Greek ethos, meaning the characteristic traits or features which distinguish a group-any particular group of people or,in biology,a group of animals such as a species. Ethnologists have the intention of studying "the whole sequence of acts which constitute an animals behavior."ln abridged dictionaries ethnology is sometimes defined simply as "the objective study of animal behavior,"and ethnologists do emphasize their wish to eliminate myths.

In the first sentence, the word"laymen"means____.

A．people who stand aside

B．people who are not trained as biologists

C．people who are amateur biologists

D．people who love animals

For laymen ethnology is probably the most interesting of the biological sciences for the very reason that it concerns animals in their normal activities and therefore, if we wish, we can assess the possible dangers and advantages in our own behavioral roots. Ethnology also is interesting methodologically because it combines in new ways very scrupulous field observations with experimentations in laboratories.

The field workers have had some handicaps in winning respect for themselves. For a long time they were considered as little better than amateur animal-watchers-certainly not scientists, since their facts were not gained by experimental procedures: they could not conform. to the hard-and-fast rule that a problem set up and solved by one scientist must be tested by other scientists, under identical conditions and reaching identical results. Of course many situations in the lives of animals simply cannot be rehearsed and controlled in this way. The fall flocking of wild froe birds can't be, or the homing of animals over long distances, or even details of spontaneous family relationships. Since these never can be reproduced in a laboratory, are they then not worth knowing about?

The ethnologists who choose field work have got themselves out of this impasse by greatly refining the techniques of observing. At the start of a project all the animals to be studied are live-trapped, marked individually, and released. Motion pictures, often in color, provide permanent records of their subsequent activities. Recording of the animals' voices by electrical sound equipment is considered essential, and the most meticulous notes are kept of all that occurs. With this material other biologists, far from the scene, later can verify the reports. Moreover, two field observers often go out together, checking each other's observations right there in the field.

Ethnology, the word, is derived from the Greek ethos, meaning the characteristic traits or features which distinguish a group-any particular group of people or, in biology, a group of animals such as a species. Ethnologists have the intention of studying "the whole sequence of acts which constitute an animal's behavior." In abridged dictionaries ethnology is sometimes defined simply as "the objective study of animal behavior," and ethnologists do emphasize their wish to eliminate myths.

In the first sentence, the word "laymen", means ______.

A．people who stand aside

B．people who are not trained as biologists

C．people who are amateur biologists

D．people who love animals

Loss due to delayed arrival of the goods

  In 2006 an import and export corporation exported 1 000 tons of walnut to a British company on the basis of CIF. Payment is made by irrevocable letter of credit at sight. The terms of delivery is subject to the arrival of the goods in Avonmouth on December 2 ,2006 , which is a special item. Our violation to this term resultecl in some economic losses. The basic items in the contract as follows :

  Shipment: To be shipped during Oct. 2006 from China port to Avonmouth. The relevant UC opened by the Buyer will reach the Seller before the end of Sept. 2006. Seller undertakes to guarantee that the carrying steamer shall arrive at the named port of destination not later than Dec.2,2006. The actual date of her arrival at the named port of destination will be subject to the actual date of her arrival at the port of destination named verified by the relevant carrier or her agents.

  Special terms and conditions on Prices :

  (1) In case the carrying vessel arrives at Avonmouth earlier than Nov. 26 ,2006 , the Buyer shall pay the Seller price premium of 0.2% on the total invoice value per day.

  (2)In case the carrying streamer arrives at Avonmouth later than Dec. 2,2006, the Seller shall agree to have the contract cancelled if so requested by the Buyer and if the payment has been already collected , it shall be refunded to the Buyer. Notice of the request for cancellation of contract is in all cases to be made to the Seller within 48 (forty-eight) hours after the time of arrival of the steamer at Avonmouth, otherwise the delivery shall be deemed as having been accepted by the Buyer.

  After signing the contract , our corporation, through a forwarding agent, hired a vessel whose nationality is Sweden. The vessel started out on its voyage after loading on Oct. 5, 2006, and it was estimated that it would arrive at the destination on Dec. 2, 2006 if everything is in order.

  Unfortunately, during the voyage, an engine of the vessel stopped working. Our corporation sent a towboat to drag the vessel forward considering the large amount of the shipments. But after the vessel's arrival at Avonmouth it was several hours later than the stipulated time of delivery ( Dec. 2,2006) in the contract. Seeing the price of walnut was falling down in the local market,the Buyer notified our corporation that he refused to take delivery of the goods. Our company had to ask some agents to help sell all the goods on the spot in order to reduce the damage.

  In this transaction,the loss of our party suffered was about USD600 000.

  Questions :

  (1) For walnuts are seasonal merchandises, usually they are sold before Christmas day. When exporting this kind of' goods ,what factor do you think is very important?

  (2) In this case , the nature of the contract has changed from the Shipment Contract to Arrival Contract , why?

  (Translate the case into Chinese and then answer the question)

  Helpful hint: Some clauses of this contract change the characteristics of CIF contract.