Title Reading 46 Understanding Fixed-Income Risk and Return.pdf ✅

Question #1 of 107 Question ID: 1458743 A bond has a modified duration of 7 and convexity of 100. If interest rates decrease by 1%, the price of the bond will most likely: A) decrease by 7.5%. B) increase by 6.5%. C) increase by 7.5%. Question #2 of 107 Question ID: 1458735 The price of a bond is equal to $101.76 if the term structure of interest rates is flat at 5%. The following bond prices are given for up and down shifts of the term structure of interest rates. Using the following information what is the approximate percentage price change of the bond using effective duration and assuming interest rates decrease by 0.5%? Bond price: $98.46 if term structure of interest rates is flat at 6% Bond price: $105.56 if term structure of interest rates is flat at 4% A) 1.74%. B) 0.174%. C) 0.0087%. Question #3 of 107 Question ID: 1458732 Given a bond with a modified duration of 1.93, if required yields increase by 50 basis points, the price would be expected to decrease by: A) 1.930%. B) 0.965%. C) 0.009%.
Question #4 of 107 Question ID: 1458761 The approach to estimating duration that relies on using historical relationships between benchmark yield changes and bond price changes is: A) modified duration. B) analytical duration. C) empirical duration. Question #5 of 107 Question ID: 1458668 Calculate the effective duration for a 7-year bond with the following characteristics: Current price of $660 A price of $639 when the yield curve shifts up 50 basis points A price of $684 when the yield curve shifts down by 50 basis points A) 6.5. B) 6.8. C) 3.1. Question #6 of 107 Question ID: 1462944 On Monday, the yield curve is upward sloping with yields of 3%, 4%, and 5.5% on 1-year, 5- year, and 10-year government bonds, respectively. The following day, the yield curve experiences an upward parallel shift equal to 50 basis points. Other things equal, which of the following noncallable 6% coupon bonds is likely to experience the smallest percent change in price as a result of the yield curve shift? A) Zero coupon government bond maturing in five years. B) Par value government bond maturing in five years. C) Par value government bond maturing in ten years.
Question #7 of 107 Question ID: 1458674 A non-callable bond with 10 years remaining maturity has an annual coupon of 5.5% and a $1,000 par value. The yield to maturity on the bond is 4.7%. Which of the following is closest to the estimated price change of the bond using duration if rates rise by 75 basis points? A) -$61.10. B) -$5.68. C) -$47.34. Question #8 of 107 Question ID: 1458733 A callable bond trading at $1,000 has an effective duration of 5 and modified duration of 6. If the market yield increases by 1% the bond's price will decrease by approximately: A) $60. B) $50. C) $55. Question #9 of 107 Question ID: 1458758 Price risk will dominate reinvestment risk when the investor's: A) duration gap is negative. B) duration gap is positive. C) investment horizon is less than the bond’s tenor. Question #10 of 107 Question ID: 1462941 Annual Macaulay duration is least accurately interpreted as the: A) weighted average number of years until a bond’s cash flows are scheduled to be paid.
B) approximate percentage change in a bond’s value for a 1% change in its yield to maturity. C) investment horizon at which a bond’s market price risk and reinvestment risk exactly offset. Question #11 of 107 Question ID: 1458689 Sensitivity of a bond's price to a change in yield at a specific maturity is least appropriately estimated by using: A) effective duration. B) key rate duration. C) partial duration. Question #12 of 107 Question ID: 1458720 An annual-pay bond is priced at 101.50. If its yield to maturity decreases 100 basis points, its price will increase to 105.90. If its yield to maturity increases 100 basis points, its price will decrease to 97.30. The bond's approximate modified convexity is closest to: A) 0.2. B) 19.7. C) 4.2. Question #13 of 107 Question ID: 1458728 Negative effective convexity will most likely be exhibited by a: A) callable bond at high yields. B) callable bond at low yields. C) putable bond at high yields.