22_Duration and Convexity

22_Duration and Convexity - BM 410 HW #22 Multiple Choice...

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BM 410 HW #22 Multiple Choice 1. All other things equal, which of the following would you expect to have the longest duration? A) a 30 year bond with a 10% coupon B) a 20 year bond with a 9% coupon C) a 20 year bond with a 7% coupon D) a 30 year zero coupon bond 2. Bond prices are _______ sensitive to changes in yield when the bond is selling at a _______ initial yield to maturity. A) more; lower B) more; higher C) less; lower D) none of the above is correct 3. An increase in a bond's yield to maturity results in a price decline that is ________ the price increase resulting from a decrease in yield of equal magnitude. A) greater than B) equivalent to C) smaller than D) The Answer is indeterminate 4. If you expect interest rates to increase in the future more than the market expects, then you should A) Increase the duration and convexity of your portfolio B) Decrease the duration and increase convexity of your portfolio C) Leave the duration the same and decrease convexity D) Increase duration and decrease convexity
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22_Duration and Convexity - BM 410 HW #22 Multiple Choice...

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