Reference no: EM131063457
1. How does the size of the change in a bond's price react in response to a given change in the yield to maturity as the time to maturity increases?
A. decreases at an increasing rate
B. decreases at a diminishing rate
C. increases at a constant rate
D. increases at a diminishing rate
E. increases at an increasing rate
2. Which one of the following statements is correct concerning Macaulay duration?
A. The duration of a zero coupon bond is equal to the time to maturity.
B. Most bonds have durations in excess of 15 years.
C. The duration of a coupon bond is a linear function between the time to maturity and the duration.
D. The duration of a coupon bond is greater than that of a zero coupon bond given equal maturity dates.
E. The percentage change in a bond's price is approximately equal to the change in the yield to maturity multiplied by (-1 × Macaulay duration).
3. The modified duration:
A. is equal to the Macaulay duration divided by (1 + Yield to maturity).
B. multiplied by (-1 × Change in the yield to maturity) equals the approximate percentage change in a bond's price.
C. will be the same for any bonds that have equal times to maturity.
D. only applies to pure discount securities.
E. must be converted to a Macaulay duration before computing the percentage change in a bond's price.
4. A bond has a face value of $1,000 and a coupon rate of 5.5 percent. What is your annual interest payment if you own 8 of these bonds?
A. $110
B. $220
C. $330
D. $440
E. $880
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