Fixed_Income Chapter 2 - 4.88 d 2.50 5 Which of the...

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

View Full Document Right Arrow Icon
Chapter 2 – Risk Associated with Investing in Bonds 1) A bond with a 7.3% yield has duration of 5.4 and is trading at $985.00. If the yield decreases to 7.1%, the new bond price is closest to: a. %974.40 b. $1,038.30 c. $995.60 d. $1,091.40 2) If interest rate volatility increases, which of the following bonds will experience a price decrease? a. A callable bond b. A potable bond c. A zero-coupon bond d. An option free, 4.9% coupon bond 3) A non-callable, AA-rated, 5 year zero-coupon bond with a yield of 6% has all of the following except: a. Interest rate risk b. Inflation risk c. Reinvestment risk d. Default risk 4) The current price of a bond is 102.50. If interest rates change by 0.5%, the value of the bond price changes by 2.50. What is the duration of the bond? a. 5.00 b. 2.44 c.
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: 4.88 d. 2.50 5) Which of the following bonds has the greatest interest rate risk? a. A 5% 10-year callable bond yielding 4% b. A 5% 10-year putable bond yielding 6% c. A 5% 10-year option free bond yielding 4% d. A 5% 10-year option free bond yielding 6% 6) A floating rate security will have the greatest duration: a. The day before the reset date b. The day after the reset date c. Just prior to maturity because it has the largest cash flow d. Never – floating rate securities have a duration of zero 7) The duration of a bond is 5.47, and its current price is $986.30. Which of the following is the best estimate of the bond price change if interest rates increase by 2%? a.-$109.40 b.-$107.90 c. $107.90 d. $109.40...
View Full Document

This note was uploaded on 11/06/2010 for the course ECON Econ taught by Professor Liasa during the Spring '10 term at University of San Francisco.

Page1 / 2

Fixed_Income Chapter 2 - 4.88 d 2.50 5 Which of the...

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