15. If a financial institution has a portfolio that half (50%) consists of bonds with a tenor of five years andthe other half is in the form of bonds with a duration of seven years, what is the duration/tenor of thefinancial institution's portfolio?A) 12 yearsB) 7 yearsC) 6 yearsD) 5 years16. If the corporation/company begins to experience large losses, the default risk on the company's bondswill beA) increases and the uncertainty of bond returns increases, meaning that the expected return on thecompany's bonds will decrease.B) increases and the uncertainty of bond returns decreases, which means the expected return on thecompany's bonds will decrease.C) decreases and the uncertainty of bond returns decreases, which means the expected return of thecompany's bonds will decrease.D) decreases and the uncertainty of bond returns decreases, which means the expected return of thecompany's bonds will increase.

The financial portfolio is made for minimizing the risk and maximizing the profit.

15. If a financial institution has a portfolio that half (50%) consists of bonds with a tenor of five years and the other half is in the form of bonds with a duration of seven years, what is the duration/tenor of the financial institution's portfolio? A) 12 years B) 7 years C) 6 years D) 5 years

15. If a financial institution has a portfolio that half (50%) consists of bonds with a tenor of five years and the other half is in the form of bonds with a duration of seven years, what is the duration/tenor of the financial institution's portfolio? A) 12 years B) 7 years C) 6 years D) 5 years

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

15. If a financial institution has a portfolio that half (50%) consists of bonds with a tenor of five years and
the other half is in the form of bonds with a duration of seven years, what is the duration/tenor of the
financial institution's portfolio?
A) 12 years
B) 7 years
C) 6 years
D) 5 years
16. If the corporation/company begins to experience large losses, the default risk on the company's bonds
will be
A) increases and the uncertainty of bond returns increases, meaning that the expected return on the
company's bonds will decrease.
B) increases and the uncertainty of bond returns decreases, which means the expected return on the
company's bonds will decrease.
C) decreases and the uncertainty of bond returns decreases, which means the expected return of the
company's bonds will decrease.
D) decreases and the uncertainty of bond returns decreases, which means the expected return of the
company's bonds will increase.

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