Reference no: EM132412286
1. Consider a perpetuity that pays $1000 per year forever. Suppose the yield on this perpetuity is 5%. What is its duration?
A) infinity
B) 1000 years
C) 21 years
D) 5 years
2. A 3-year bond pays annual coupons at 5%. Its par value is $1000. If its yield to maturity is 4%, what is its duration and modified duration, respectively?
A) Duration = 5 years and modified duration = 4.6 years.
B) Duration = 3 years and modified duration = 3.2 years.
C) Duration = 2.86 years and modified duration = 2.75 years.
D) Duration = 2.55 years and modified duration = 1.95 years.
3. Other things being equal, which of the following has the longest duration?
A) a 15 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 10 year zero coupon bond
4. A bond currently has a price of $1,030. The present yield on the bond is 8.00%. If the yield changes from 8.00% to 8.10%, the price of the bond will go down to $1,020. The duration of this bond is __________.
A) -10.5
B) -8.5
C) 9.7
D) 10.5
5. Consider a 5-year $1000 par value bond with 10% coupon paid annually. If the yield to maturity is 7%, what is the duration?
A) 10 years
B) 5.00 years
C) 4.22 years
D) 3.37 years
E) 2.61 year
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