Fixed Income Chapter 7 - closest to: Duration Convexity a....

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 7 1) Which of the following statements best describes the concept of negative convexity in bond prices? a. As interest rates fall, the bond’s prices increase at a decreasing rate. b. As interest rates fall, the bond’s prices increase at an increasing rate. c. As interest rates rise, the bond’s prices approaches a minimum value d. As interest rates rise, the bond’s prices decreases at an increasing rate. 2) An investor owns $15 million face of the 4.65% semiannual pay Portage Health Authority bonds. The bonds have exactly 17 years to maturity and are currently priced to yield 4.39%. Using the full valuation approach, the interest rate exposure (in percent of value) for this bond position, given a 75 basis point increase in required yield is closest to: a. -7.927% b. -8.344% c. 8.344% d. 7.927% 3) An analyst is estimating the interest rate risk of a 14% semiannual pay coupon with six years to maturity. The bond is currently trading at par. The effective duration and effective convexity of the bond for a 25 basis point change in yield is
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: closest to: Duration Convexity a. 3.970 11.6 b. 3.74 11.6 c. 3.97 10.4 d. 3.74 10.4 4) An investor is analyzing at a bond that has an effective duration of 10.5 and a convexity of 97.3. Using both of these measures, the percentage change in price for this bond, given market yields are expected to decline by 200 basis points, is closest to: a. 18.37% b. 20.04% c. 22.23% d. 24.89% 5) A corporate bond with an 8% annual pay coupon matures in exactly 12 years. The bond is currently yielding 6.8% and is currently callable at a price of 112. The effective duration and convexity of this bond for a 50 basis point change in rates are closest to: Duration Convexity a. 5.95 41.21 b. 5.95-327.47 c. 7.80 41.21 d. 7.80-327.47 6) A 10 year semiannual pay bond with an 8% coupon is currently selling at par. The price value of a basis point for this bond is closest to: a. $0.055 b. $0.068 c. $0.076 d. $.136...
View Full Document

Page1 / 2

Fixed Income Chapter 7 - closest to: Duration Convexity a....

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online