Site MapHelpFeedbackMultiple Choice Quiz
Multiple Choice Quiz
(See related pages)



1

The duration of a bond is a function of the bond's
A)coupon rate.
B)time to maturity.
C)yield to maturity.
D)all of the above
E)none of the above
2

The "modified duration" used by practitioners is equal to the Macaulay duration
A)times the change in interest rate.
B)times (one plus the bond's yield to maturity).
C)divided by (one plus the bond's yield to maturity).
D)divided by (one minus the bond's yield to maturity).
E)none of the above
3

Which of the following two bonds is more price sensitive to changes in interest rates? A par value bond, X, with a 5-year-to-maturity and a 10% coupon rate or a zero-coupon bond, Y, with a 5-year-to-maturity and a 10% yield-to-maturity.
A)Bond Y because of the longer duration.
B)Bond X because of the longer time to maturity.
C)Bond X because of the higher yield to maturity.
D)Both have the same sensitivity because both have the same yield to maturity.
E)None of the above are true.
4

Which of the following is not true?
A)Holding other things constant, the duration of a bond increases with time to maturity.
B)Given time to maturity and yield to maturity, the duration of a bond is higher when the coupon rate is lower.
C)Given time to maturity, the duration of a zero-coupon decreases with yield to maturity.
D)Duration is a better measure of price sensitivity to interest rate changes than is time to maturity.
E)None of the above are true.
5

Active bond portfolio management strategies include all of the following except
A)immunization.
B)rate anticipation swap.
C)intermarket spread.
D)substitution swap.
E)none of the above.
6

Par value bond KDB has a modified duration of 9. Which one of the following statements regarding the bond is true?
A)If the market yield increases by 1% the bond's price will decrease by $45.
B)If the market yield increases by 1% the bond's price will increase by $45.
C)If the market yield increases by 1% the bond's price will decrease by $90.
D)If the market yield decreases by 1% the bond's price will increase by $90.
E)none of the above
7

The two components of interest-rate risk are
A)price risk and default risk.
B)price risk and reinvestment risk.
C)call risk and price risk.
D)reinvestment risk and systematic risk.
E)none of the above
8

Indexing of bond portfolios is difficult because
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 above
E)Both B and C are true.
9

Duration
A)assesses the time element of bonds in terms of both coupon and term to maturity.
B)is a direct comparison between bond issues with different levels of risk.
C)allows structuring a portfolio to avoid interest-rate risk.
D)A and B.
E)A and C.
10

The duration of a perpetuity with a yield of 11% is
A)13.50 years.
B)12.11 years.
C)10.09 years.
D)cannot be determined.
E)none of the above





To learn more about the book this website supports, please visit its Information Center.
(c)2005 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.


bodie6eOnline Learning Center with Powerweb

Home > Chapter 16 > Multiple Choice Quiz