Homework 16 - d. Difference between the market value of the...

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Chapter 16 – Introduction to Bond Portfolio Management 1) Which of the following is NOT an example of a client-imposed constraint? a. Limits on the use of leverage in the portfolio b. Limits on the maximum funds that can be allocated to a single industry c. Position in the spending phrase of the life cycle of wealth accumulation d. Minimum acceptable credit rating for determining eligibility for the purchase of an issue 2) A floating-rate note, where the timing of the liability is known with certainty but the liability amount is uncertain, is an example of which of the following types of liabilities? a. Type I liability b. Type II liability c. Type III liability d. Type IV liability 3) Economic surplus is a measure of the: a. Market value of the assets b. Market value of the liabilities c. Sum of the market value of the asset and the market value of the liabilities
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Unformatted text preview: d. Difference between the market value of the assets and the market value of the liabilities 4) In addition to duration, the sensitivity of an asset or liability to interest rate change can be best approximated using which of the following measures? a. Yield Beta b. Convexity c. Tracking Error d. Standard Deviation 5) Tamarack Insurance Company currently lists assets of $40 million and liabilities of $25 million. The assets have duration of eight years with a convexity of 87.5. The liabilities have duration of 2 years with a convexity of 20. If interest rates increase by 100 basis points, which of the following represents the change in economic surplus? a.-$798,750 b.-$900,000 c.-$2,400,000 d.-$2,793,000...
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Homework 16 - d. Difference between the market value of the...

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