A) 13.50 years.
B) 11 years.
C) 6.66 years.
D) Cannot be determined
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A) the number of bonds included in the major indexes is so large that it would be difficult to purchase them in the proper proportions.
B) many bonds are thinly traded, so it is difficult to purchase them at a fair market price.
C) the composition of bond indexes is constantly changing.
D) All of the options are true.
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A) The duration of a 15% yield perpetuity that pays $100 annually is longer than that of a 15% yield perpetuity that pays $200 annually.
B) The duration of a 15% yield perpetuity that pays $100 annually is shorter than that of a 15% yield perpetuity that pays $200 annually.
C) The duration of a 15% yield perpetuity that pays $100 annually is equal to that of a 15% yield perpetuity that pays $200 annually.
D) The duration of a perpetuity cannot be calculated.
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A) term to maturity is lower.
B) coupon rate is higher.
C) yield to maturity is lower.
D) current yield is higher.
E) None of the options are correct.
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A) conventional duration strategies assume a flat yield curve.
B) duration matching can only immunize portfolios from parallel shifts in the yield curve.
C) immunization only protects the nominal value of terminal liabilities and does not allow for inflation adjustment.
D) conventional duration strategies assume a flat yield curve, and immunization only protects the nominal value . of terminal liabilities and does not allow for inflation adjustment.
E) All of the options are correct.
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A) If the market yield increases by 1%, the bond's price will decrease by $55.
B) If the market yield increases by 1%, the bond's price will increase by $55.
C) If the market yield increases by 1%, the bond's price will decrease by $110.
D) If the market yield increases by 1%, the bond's price will increase by $110.
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A) it requires choosing an asset portfolio that matches an index.
B) there is likely to be a gap between the values of assets and liabilities in most portfolios.
C) it requires frequent rebalancing as maturities and interest rates change.
D) durations of assets and liabilities fall at the same rate.
E) None of the options are correct.
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A) current yield
B) the Macaulay duration
C) yield to call
D) yield to maturity
E) None of the options are correct.
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A) term to maturity is lower.
B) coupon rate is higher.
C) yield to maturity is higher.
D) term to maturity is lower and coupon rate is higher.
E) All of the options are correct.
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A) 6.0 years.
B) 5.1 years.
C) 4.27 years.
D) 3.95 years.
E) None of the options are correct.
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A) 8.05.
B) 9.44.
C) 9.27.
D) 11.22.
E) None of the options are correct.
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A) 13.50 years.
B) 12.11 years.
C) 17.67 years.
D) Cannot be determined
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Correct Answer
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A) time to maturity.
B) coupon rate.
C) yield to maturity.
D) All of the options are correct.
E) None of the options are correct.
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A) The duration of the higher coupon bond will be higher.
B) The duration of the lower coupon bond will be higher.
C) The duration of the higher coupon bond will equal the duration of the lower coupon bond.
D) There is no consistent statement that can be made about the durations of the bonds.
E) The duration of the higher coupon bond will be higher, and the duration of the higher coupon bond will equal the duration of the lower coupon bond.
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A) Holding other things constant, the duration of a bond increases with time to maturity.
B) Given time to maturity, the duration of a zero-coupon decreases with yield to maturity.
C) Given time to maturity and yield to maturity, the duration of a bond is higher when the coupon rate is lower.
D) Duration is a better measure of price sensitivity to interest-rate changes than is time to maturity.
E) All of the options are correct.
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A) the risk related to the possibility of bankruptcy of the bond's issuer.
B) the risk that arises from the uncertainty of the bond's return caused by changes in interest rates.
C) the unsystematic risk caused by factors unique in the bond.
D) the risk related to the possibility of bankruptcy of the bond's issuer, and the risk that arises from the uncertainty of the bond's return caused by changes in interest rates.
E) All of the options are correct.
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A) If the market yield increases by 1%, the bond's price will decrease by $90.
B) If the market yield increases by 1%, the bond's price will increase by $90.
C) If the market yield increases by 1%, the bond's price will decrease by $60.
D) If the market yield decreases by 1%, the bond's price will increase by $60.
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A) fixed-rate mortgages.
B) adjustable-rate mortgages.
C) certificates of deposit.
D) short-term borrowing.
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A) only coupon payments matter.
B) only maturity value matters.
C) the coupon payments made prior to maturity make the effective maturity of the bond greater than its actual time to maturity.
D) the coupon payments made prior to maturity make the effective maturity of the bond less than its actual time to maturity.
E) coupon rates don't matter.
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A) change the credit risk of a portfolio.
B) extend the duration of a portfolio.
C) reduce the duration of a portfolio.
D) profit from apparent mispricing between two bonds.
E) adjust for differences in the yield spread.
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