SELECTED FINAL MC3

SELECTED FINAL MC3 - 11. The basic purpose of immunization...

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11. The basic purpose of immunization is to A) eliminate default risk. B) produce a zero net interest rate risk. C) offset price and reinvestment risk. D) a and b. E) b and c. 12. Active bond portfolio management strategies include all of the following except A) substitution swap. B) rate anticipation swap. C) intermarket spread. D) immunization. E) none of the above. 16. Par value bond XYZ has a modified duration of 6. Which one of the following statements regarding the bond is true? A) If the market yield increases by 1% the bond's price will decrease by $60. B) If the market yield increases by 1% the bond's price will increase by $50. C) If the market yield increases by 1% the bond's price will decrease by $50. D) If the market yield decreases by 1% the bond's price will increase by $60. E) None of the above. 18. Which one of the following par value 12% coupon bonds experiences a price change of $23 when the market yield changes by 50 basis points? A) The bond with a duration of 6 years. B) The bond with a duration of 5 years. C) The bond with a duration of 2.7 years. D) The bond with a duration of 5.15 years. E) None of the above. 19. Which one of the following statements is true concerning the duration of a perpetuity? A)
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This note was uploaded on 04/15/2009 for the course ACCOUNTING BUSI0027 taught by Professor Guan during the Spring '09 term at HKU.

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SELECTED FINAL MC3 - 11. The basic purpose of immunization...

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