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Practice Questions_ Fixed Income Securities_Spring_2010

# Practice Questions_ Fixed Income Securities_Spring_2010 -...

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FINC 414 Investments Practice Questions for Fixed Income Securities Spring 2010 1. When discussing bonds, convexity relates to the ________. A) shape of the bond price curve B) shape of the yield curve C) slope of the yield curve D) shape of the bond dealer 2. The primary difference between Treasury notes and bonds is _________. 3. Consider two bonds, A and B. Both bonds presently are selling at their par value of \$1,000. Each pay interest of \$120 annually. Bond A will mature in 5 years while bond B will mature in 6 years. If the yields to maturity on the two bonds change from 12% to 14%, __________. You deposit \$1,000 in a bank for one month. The annual interest rate is 10%.(This is for questions 4 through 5) 4. What is your account balance at the end of one month if bank pays interest four times per month? 5. What is your account balance at the end of one month if bank pays interest continuously? a) 1000*exp(0.1/365) b) 1000*exp(0.1/12) c) 1000*exp(0.1/6) d)1000*exp(0.1/2)

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6. A zero-coupon bond has a yield to maturity of 5% and a par value of \$1,000. If the bond matures in 16 years, it should sell for a price of __________ today. 7. A 1% decline in yield will have the least effect on the price of the bond with a __________.
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Practice Questions_ Fixed Income Securities_Spring_2010 -...

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