Investments 10ce Bodie TB 16_version1
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University of Calgary *
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Date
Jan 9, 2024
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MULTIPLE CHOICE - Choose the one alternative that
best completes the statement or answers the question.
1)
The duration of a bond is a function of the bond's
A) coupon rate.
B) yield to maturity.
C) time to maturity.
D) All of the
options are correct.
E) None of the
options are correct.
2)
Ceteris paribus, the duration of a bond is positively
correlated with the bond's
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.
3)
Ceteris paribus, the duration of a bond is negatively
correlated with the bond's
A) time to maturity.
B) coupon rate.
C) yield to maturity.
D) coupon rate and
yield to maturity.
E) None of the
options are correct.
4)
Holding other factors constant, the interest-rate risk of
a coupon bond is higher when the bond's
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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5)
Holding other factors constant, the interest-rate risk of
a coupon bond is higher when the bond's
A) term to maturity is higher.
B) coupon rate is higher.
C) yield to maturity is higher.
D) All of the
options are correct.
E) None of the
options are correct.
6)
Holding other factors constant, the interest-rate risk of
a coupon bond is higher when the bond's
A) term to maturity is lower.
B) coupon rate is lower.
C) yield to maturity is higher.
D) term to maturity is lower and yield to maturity is
higher.
E) None of the
options are correct.
7)
Holding other factors constant, the interest-rate risk of
a coupon bond is lower when the bond's
A) term to maturity is lower.
B) coupon rate is higher.
C) yield to maturity is lower.
D) term to maturity is lower and coupon rate is higher.
E) All of the
options are correct.
8)
Holding other factors constant, the interest-rate risk of
a coupon bond is lower when the bond's
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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9)
Holding other factors constant, the interest-rate risk of
a coupon bond is lower when the bond's
A) term to maturity is higher.
B) coupon rate is lower.
C) yield to maturity is higher.
D) term to maturity is higher and coupon rate is lower.
E) All of the
options are correct.
10)
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 minus the bond's yield to
maturity).
D) divided by (one
plus the bond's yield to
maturity).
E) None of the
options are correct.
11)
The "modified duration" used by practitioners is equal
to ______ divided by (one plus the bond's yield to maturity).
A) current yield
B) the Macaulay duration
C) yield to call
D) yield to maturity
E) None of the
options are correct.
12)
Given the time to maturity, the duration of a zero-
coupon bond is higher when the discount rate is
A) higher.
B) lower.
C) equal to the risk-free rate.
D) The bond's duration is independent of the discount
rate.
E) None of the
options are correct.
13)
The interest-rate risk of a bond is
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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.
14)
Which of the following two bonds is more price
sensitive to changes in interest rates?
1) A par value bond, X, with a 5-year year to maturity and a
10% coupon rate.
2) A zero-coupon bond, Y,
with a 5-year year to
maturity and a 10% yield
to maturity.
A) Bond X because of the higher yield to maturity
B) Bond X because of the longer time to maturity
C) Bond Y because of the longer duration
D) Both have the same sensitivity because both have
the same yield to maturity.
E) None of the
options are correct.
15)
Holding other factors constant, which one of the
following bonds has the smallest price volatility?
A) 6-year, 0% coupon bond
B) 6-year, 11% coupon bond
C) 6-year, 13% coupon bond
D) 6-year, 09%
coupon bond
E) Cannot tell from
the information given
16)
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, 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
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changes than is time to maturity.
E) All of the options are correct.
17)
Which of the following statements are true?
I) Holding other things constant, the duration of a bond
decreases with time to maturity.
II) Given time to maturity, the duration of a zero-coupon
increases with yield to maturity.
III). Given time to maturity and yield to maturity, the duration
of a bond is higher when the coupon rate is lower.
IV) Duration is a better
measure of price
sensitivity to interest-rate
changes than is time to
maturity.
A) I only
B) I and II
C) III only
D) III and IV
E) I, II, and IV
18)
The duration of a 3-year zero-coupon bond is
A) smaller than 3.
B) larger than 3.
C) equal to 3.
D) equal to that of a 3-year 10% coupon bond.
E) None of the
options are correct.
19)
The basic purpose of immunization is to
A) eliminate default risk.
B) produce a zero net-interest-rate risk.
C) offset price and reinvestment risk.
D) eliminate default risk and produce a zero net-
interest-rate risk.
E) produce a zero
net-interest-rate risk and
offset price and
reinvestment risk.
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A) 5 years.
B) 5.4 years.
C) 4.17 years.
D) 4.31 years.
21)
The duration of a perpetuity with a yield of 9% is
A) 13.50 years.
B) 12.11 years.
C) 6.66 years.
D) Cannot be
determined
22)
A seven-year par value bond has a coupon rate of 9%
(paid annually) and a modified duration of
A) 7 years.
B) 5.49 years.
C) 5.03 years.
D) 4.87 years.
23)
Par-value bond XYZ has a modified duration of 5.
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 $60.
B) If the market yield increases by 1%, the bond's
price will increase by $50.
C) If the market yield increases by 1%, the bond's
price will decrease by $50.
D) If the market
yield increases by 1%, the
bond's price will increase
by $60.
24)
Which of the following bonds has the longest
duration?
A) An 7-year maturity, 0% coupon bond
B) An 7-year maturity, 7% coupon bond
C) A 9-year maturity, 7% coupon bond
D) A 9-year
maturity, 0% coupon bond
E) Cannot tell from
the information given
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25)
Which one of the following par-value 12% coupon
bonds experiences a price change of $23 when the market
yield changes by 50 basis
points?
A) The bond with a duration of 6 years
B) The bond with a duration of 5 years
C) The bond with a duration of 2.7 years
D) The bond with a
duration of 5.15 years
26)
Which one of the following statements is true
concerning the duration of a perpetuity?
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.
27)
The two components of interest-rate risk are
A) price risk and default risk.
B) reinvestment risk and systematic risk.
C) call risk and price risk.
D) price risk and
reinvestment risk.
E) None of the
options are correct.
28)
The duration of a coupon bond
A) does not change after the bond is issued.
B) can accurately predict the price change of the bond
for any interest-rate change.
C) will decrease as the yield to maturity decreases.
D) All of the
options are true.
E) None of the
options are true.
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29)
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
options are true.
30)
Duration measures
A) weighted-average time until a bond's half-life.
B) weighted-average time until cash flow payment.
C) the time required to make excessive profit from the
investment.
D) weighted-average time until a bond's half-life and
the time required to make excessive profit from the
investment.
E) weighted-
average time until cash
flow payment and the time
required to make excessive
profit from the investment.
31)
Duration
A) assesses the time element of bonds in terms of both
coupon and term to maturity.
B) allows structuring a portfolio to avoid interest-rate
risk.
C) is a direct comparison between bond issues with
different levels of risk.
D) assesses the time element of bonds in terms of both
coupon and term to maturity and allows structuring a portfolio
to avoid interest-rate risk.
E) assesses the time
element of bonds in terms
of both coupon and term to
maturity and is a direct
comparison between bond
issues with different levels
of risk.
32)
Identify the bond that has the longest duration (no
calculations necessary).
A) 20-year maturity with an 8% coupon
B) 20-year maturity with a 12% coupon
C) 20-year maturity with a 0% coupon
D) 10-year maturity
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with a 15% coupon
E) 12-year maturity with a 12% coupon
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33)
When interest rates decline, the duration of a 10-year
bond selling at a premium
A) increases.
B) decreases.
C) remains the same.
D) increases at
first, then declines.
E) decreases at
first, then increases.
34)
An 8%, 30-year corporate bond was recently being
priced to yield 10%. The Macaulay duration for the bond is
10.20 years. Given this information, the bond's modified
duration would be
A) 8.05.
B) 9.44.
C) 9.27.
D) 11.22.
E) None of the
options are correct.
35)
An 8%, 15-year bond has a yield to maturity of 10%
and duration of 8.35 years. If the market yield changes by 25
basis points, how much change will there be in the bond's
price?
A) 1.83%
B) 1.89%
C) 3.27%
D) 6.44%
36)
One way that banks can reduce the duration of their
asset portfolios is through the use of
A) fixed-rate mortgages.
B) adjustable-rate mortgages.
C) certificates of deposit.
D) short-term
borrowing.
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37)
The duration of a bond normally increases with an
increase in
A) term to maturity.
B) yield to maturity.
C) coupon rate.
D) All of the
options are correct.
E) None of the
options are correct.
38)
Immunization is not a strictly passive strategy because
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.
39)
Some of the problems with immunization are
A) duration assumes that the yield curve is flat.
B) duration assumes that if shifts in the yield curve
occur, these shifts are parallel.
C) immunization is valid for one interest-rate change
only.
D) durations and horizon dates change by the same
amounts with the passage of time.
E) immunization is
valid for one interest-rate
change only, duration
assumes that the yield
curve is flat, and that if
shifts in the yield curve
occur, these shifts are
parallel.
40)
If a bond portfolio manager believes
I) in market efficiency, he or she is likely to be a passive
portfolio manager.
II) that he or she can accurately predict interest-rate changes,
he or she is likely to be an active portfolio manager.
III) that he or she can
identify bond-market
anomalies, he or she is
likely to be a passive
portfolio manager.
A) I only
B) II only
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C) III only
D) I and II
E) I, II, and III
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41)
Cash flow matching on a multiperiod basis is referred
to as
A) immunization.
B) contingent immunization.
C) dedication.
D) duration
matching.
E) rebalancing.
42)
Immunization through duration matching of assets and
liabilities may be ineffective or inappropriate because
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.
43)
The curvature of the price yield curve for a given bond
is referred to as the bond's
A) modified duration.
B) immunization.
C) sensitivity.
D) convexity.
E) tangency.
44)
Consider a bond selling at par with modified duration
of 10.6 years and convexity of 220. A 2% decrease in yield
would cause the price to increase by 21.2% according to the
duration rule. What would be the percentage price change
according to the duration-
with-convexity rule?
A) 21.2%
B) 25.4%
C) 25.6%
D) 10.6%
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45)
A substitution swap is an exchange of bonds
undertaken to
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.
46)
A rate anticipation swap is an exchange of bonds
undertaken to
A) shift portfolio duration in response to an
anticipated change in interest rates.
B) shift between corporate and government bonds
when the yield spread is out of line with historical values.
C) profit from apparent mispricing between two
bonds.
D) change the
credit risk of the portfolio.
E) increase return
by shifting into higher
yield bonds.
47)
An analyst who selects a particular holding period and
predicts the yield curve at the end of that holding period is
engaging in
A) a rate anticipation swap.
B) immunization.
C) horizon analysis.
D) an intermarket
spread swap.
E) None of the
options are correct.
48)
Interest-rate risk is important to
A) active bond portfolio managers.
B) passive bond portfolio managers.
C) both active and passive bond portfolio managers.
D) neither active nor passive bond portfolio managers.
E) obsessive bond
portfolio managers.
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49)
Which of the following are true about the interest-rate
sensitivity of bonds?
I) Bond prices and yields are inversely related.
II) Prices of long-term bonds tend to be more sensitive to
interest-rate changes than prices of short-term bonds.
III) Interest-rate risk is correlated with the bond's coupon rate.
IV) The sensitivity of a
bond's price to a change in
its yield to maturity is
inversely related to the
yield to maturity at which
the bond is currently
selling.
A) I and II
B) I and III
C) I, II, and IV
D) II, III, and IV
E) I, II, III, and IV
50)
Which of the following are false about the interest-rate
sensitivity of bonds?
I) Bond prices and yields are inversely related.
II) Prices of long-term bonds tend to be more sensitive to
interest-rate changes than prices of short-term bonds.
III) Interest-rate risk is correlated with the bond's coupon rate.
IV) The sensitivity of a
bond's price to a change in
its yield to maturity is
inversely related to the
yield to maturity at which
the bond is currently
selling.
A) I
B) III
C) I, II, and IV
D) II, III, and IV
E) I, II, III, and IV
51)
Which of the following researchers have contributed
significantly to bond portfolio management theory?
I) Sidney Homer
II) Harry Markowitz
III) Burton Malkiel
IV) Martin Liebowitz
V) Frederick Macaulay
A) I and II
B) III and V
C) III, IV, and V
D) I, III, IV, and V
E) I, II, III, IV, and
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V
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52)
According to the duration concept,
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.
53)
Duration is important in bond portfolio management
because
I) it can be used in immunization strategies.
II) it provides a gauge of the effective average maturity of the
portfolio.
III) it is related to the
interest rate sensitivity of
the portfolio.
IV) it is a good predictor of
interest-rate changes.
A) I and II
B) I and III
C) III and IV
D) I, II, and III
E) I, II, III, and IV
54)
Two bonds are selling at par value, and each has 17
years to maturity. The first bond has a coupon rate of 6%, and
the second bond has a coupon rate of 13%. Which of the
following is true about the
durations of these bonds?
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 bond's
durations cannot be
determined without
knowing the prices of the
bonds.
55)
Two bonds are
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selling at par value, and each has 17 years to maturity. The
first bond has a coupon rate of 6%, and the second bond has a
coupon rate of 13%. Which of the following is false about the
durations of these bonds?
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.
56)
Which of the following two bonds is more price
sensitive to changes in interest rates?
1) A par-value bond, A, with a 12 year to maturity and a 12%
coupon rate.
2) A zero-coupon bond, B,
with a 12 year to maturity
and a 12% yield to
maturity.
A) Bond A because of the higher yield to maturity
B) Bond A because of the longer time to maturity
C) Bond B because of the longer duration
D) Both have the same sensitivity because both have
the same yield to maturity.
E) None of the
options are correct.
57)
Which of the following two bonds is more price
sensitive to changes in interest rates?
1) A par-value bond, D, with a 2 year to maturity and an 8%
coupon rate.
2) A zero-coupon bond, E, with a 2 year to maturity and an
8% yield to maturity.
A) Bond D because of the higher yield to maturity
B) Bond E because of the longer duration
C) Bond D because of the longer time to maturity
D) Both have the
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same sensitivity because both have the same yield to maturity.
58)
Holding other factors constant, which one of the
following bonds has the smallest price volatility?
A) 6-year, 0% coupon bond
B) 6-year, 11% coupon bond
C) 6-year, 13% coupon bond
D) 6-year, 10%
coupon bond
E) Cannot tell from
the information given
59)
Holding other factors constant, which one of the
following bonds has the smallest price volatility?
A) 10-year, 0% coupon bond
B) 10-year, 6% coupon bond
C) 10-year, 7% coupon bond
D) 10-year, 9%
coupon bond
E) Cannot tell from
the information given
60)
The duration of a 15-year zero-coupon bond is
A) smaller than 15.
B) larger than 15.
C) equal to 15.
D) equal to that of a 15-year 10% coupon bond.
E) None of the
options are correct.
61)
The duration of a 20-year zero-coupon bond is
A) equal to 20.
B) larger than 20.
C) smaller than 20.
D) equal to that of
a 20-year 10% coupon
bond.
62)
The duration of a perpetuity with a yield of 10% is
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A) 13.50 years.
B) 11 years.
C) 6.66 years.
D) Cannot be
determined
63)
The duration of a perpetuity with a yield of 6% is
A) 13.50 years.
B) 12.11 years.
C) 17.67 years.
D) Cannot be
determined
64)
Par-value-bond F has a modified duration of 6. 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 $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.
65)
Par-value-bond GE has a modified duration of 10.
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 $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
$100.
D) If the market
yield increases by 1%, the
bond's price will increase
by $110.
66)
Which of the following bonds has the longest
duration?
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A) A 15-year maturity, 0% coupon bond.
B) A 15-year maturity, 9% coupon bond.
C) A 20-year maturity, 9% coupon bond.
D) A 20-year
maturity, 0% coupon bond.
E) Cannot tell from
the information given
67)
Which of the following bonds has the longest
duration?
A) A 12-year maturity, 0% coupon bond.
B) A 12-year maturity, 8% coupon bond.
C) A 4-year maturity, 8% coupon bond.
D) A 4-year
maturity, 0% coupon bond.
E) Cannot tell from
the information given
68)
A 10%, 30-year corporate bond was recently being
priced to yield 12%. The Macaulay duration for the bond is
10.5 years. Given this information, the bond's modified
duration would be
A) 8.05.
B) 10.09.
C) 9.27.
D) 9.375.
69)
A 6%, 30-year corporate bond was recently being
priced to yield 9%. The Macaulay duration for the bond is 8.1
years. Given this information, the bond's modified duration
would be
A) 8.05.
B) 9.44.
C) 9.27.
D) 7.43.
70)
A 9%, 16-year
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bond has a yield to maturity of 9% and duration of 7.25 years.
If the market yield changes by 15 basis points, how much
change will there be in the
bond's price?
A) 1.85%
B) 1.00%
C) 2.67%
D) 6.44%
71)
A 7%, 14-year bond has a yield to maturity of 4.4%
and duration of 8.5 years. If the market yield changes by 54
basis points, how much change will there be in the bond's
price?
A) 1.85%
B) 2.91%
C) 4.40%
D) 6.44%
72)
Consider a bond selling at par with modified duration
of 12 years and convexity of 250. A 1% decrease in yield
would cause the price to increase by 12%, according to the
duration rule. What would be the percentage price change
according to the duration-
with-convexity rule?
A) 21.2%
B) 25.4%
C) 13.25%
D) 13.3%
73)
Consider a bond selling at par with modified duration
of 20 years and convexity of 415. A 2% decrease in yield
would cause the price to increase by 40% according to the
duration rule. What would be the percentage price change
according to the duration-
with-convexity rule?
A) 21.2%
B) 25.4%
C) 48.3%
D) 52.3%
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A) 3.65 years.
B) 3.45 years.
C) 3.85 years.
D) 4.00 years.
75)
The duration of a par-value bond with a coupon rate of
6% and a remaining time to maturity of 3 years is
A) 3 years.
B) 2.71 years.
C) 2.83 years.
D) 2.91 years.
76)
The duration of a par-value bond with a coupon rate of
8.7% and a remaining time to maturity of 6 years is
A) 6.0 years.
B) 5.1 years.
C) 4.27 years.
D) 3.95 years.
E) None of the
options are correct.
77)
Consider a six year annual bond paying a 7% coupon,
with a yield to maturity of 5.0%. What is the duration of the
bond?
A) 5.148
B) 5.236
C) 4.925
D) 5.687
78)
Consider a six-year annual bond paying a 5% coupon,
with a yield to maturity of 4.5%. What is the duration of the
bond?
A) 5.148
B) 5.339
C) 4.925
D) 5.687
79)
Consider a four-
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year annual bond paying a 7% coupon, with a yield to
maturity of 6.0%. What is the duration of the bond?
A) 3.631
B) 3.785
C) 3.814
D) 3.965
80)
Consider a four-year annual bond paying a 8.5%
coupon, with a yield to maturity of 9.3%. What is the duration
of the bond?
A) 3.831
B) 3.785
C) 3.614
D) 3.100
81)
Consider a four-year, zero-coupon bond, with a yield
to maturity of 7.2%. What is the duration of the bond?
A) 4.000
B) 3.785
C) 3.614
D) 3.548
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Answer Key
Test name: Investments 10ce Bodie TB 16
1) D
2) A
3) D
4) C
5) A
6) B
7) D
8) E
9) C
10) D
11) B
12) D
13) B
14) C
15) C
16) B
17) D
18) C
19) E
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20) D
21) B
22) C
23) C
24) D
25) D
26) C
27) D
28) E
29) D
30) B
31) D
32) C
33) A
34) C
35) B
36) B
37) A
38) C
39) E
40) D
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41) C
42) E
43) D
44) C
45) D
46) A
47) C
48) C
49) C
50) B
51) D
52) D
53) D
54) B
55) E
56) C
57) B
58) C
59) D
60) C
61) A
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62) B
63) C
64) C
65) C
66) D
67) A
68) D
69) D
70) B
71) C
72) C
73) C
74) A
75) C
76) E
77) A
78) B
79) A
80) D
81) A
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COURSE LEARNING OBJECTIVE: Students will use electronic worksheets or other productivity tools to
solve problems and develop models.
EXCEL LEARNING OBJECTIVES:
- Use the built-in formulas to determine the present value (PV) of a bond
- Use the built-in formulas to determine the effective issuance rate of a bond with issue costs (RATE)
- Set up an automated bond amortization schedule.
- Name cells using the Name Box
- Use Scenario Manager to create a scenario describing the effects of a change in the market interest rate (an
independent variable) on the proceeds from issuing the bond (a dependent variable) and the corresponding
total interest expense (a dependent variable) over the term of the bond.
Correcting entries for bonds transactions
AAA Inc. recently hired a new accountant with extensive experience in tax accounting. Because of the
pressures of the new job, the accountant was unable to review the topic of accounting for bonds payable.
During the first year, he made the…
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Statement 2: Effective duration is a better measure for a bond with an embedded option than modified duration.
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