a. A 6% coupon bond paying interest annually has a modified duration of 10 years, sells for $800, and is priced at a yield to maturity of 8%. If the YTM increases to 9%, what is the predicted change in price based on the bond’s duration?b. A 6% coupon bond with semiannual coupons has a convexity (in years) of 120, sells for 80% of par, and is priced at a yield to maturity of 8%. If the YTM increases to 9.5%, what is the predicted contribution of convexity to the percentage change in price due to convexity?c. A bond with annual coupon payments has a coupon rate of 8%, yield to maturity of 10%, and Macaulay duration of 9 years. What is the bond’s modified duration?d. When interest rates decline, the duration of a 30-year bond selling at a premium:i. Increases.ii. Decreases.iii. Remains the same.iv. Increases at first, then declines.e. If a bond manager swaps a bond for one that is identical in terms of coupon rate, maturity, and credit quality but offers a higher yield to maturity, the swap is:i. A substitution swap.ii. An interest rate anticipation swap.iii. A tax swap.iv. An intermarket spread swap.f. Which bond has the longest duration?i. 8-year maturity, 6% coupon.ii. 8-year maturity, 11% coupon.iii. 15-year maturity, 6% coupon.iv. 15-year maturity, 11% coupon.
a. A 6% coupon bond paying interest annually has a modified duration of 10 years, sells for $800, and is priced at a yield to maturity of 8%. If the YTM increases to 9%, what is the predicted change in price based on the bond’s duration?
b. A 6% coupon bond with semiannual coupons has a convexity (in years) of 120, sells for 80% of par, and is priced at a yield to maturity of 8%. If the YTM increases to 9.5%, what is the
predicted contribution of convexity to the percentage change in price due to convexity?
c. A bond with annual coupon payments has a coupon rate of 8%, yield to maturity of 10%, and
Macaulay duration of 9 years. What is the bond’s modified duration?
d. When interest rates decline, the duration of a 30-year bond selling at a premium:
i. Increases.
ii. Decreases.
iii. Remains the same.
iv. Increases at first, then declines.
e. If a bond manager swaps a bond for one that is identical in terms of coupon rate, maturity, and credit quality but offers a higher yield to maturity, the swap is:
i. A substitution swap.
ii. An interest rate anticipation swap.
iii. A tax swap.
iv. An intermarket spread swap.
f. Which bond has the longest duration?
i. 8-year maturity, 6% coupon.
ii. 8-year maturity, 11% coupon.
iii. 15-year maturity, 6% coupon.
iv. 15-year maturity, 11% coupon.
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