Exam 16: Managing Bond Portfolios

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 rate anticipation swap is an exchange of bonds undertaken to

A substitution swap is an exchange of bonds undertaken to

Which of the following bonds has the longest duration?

Duration measures

Holding other factors constant, which one of the following bonds has the smallest price volatility?

Cash flow matching on a multiperiod basis is referred to as

A 9%, 16-year 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?

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 false about the durations of these bonds?

Which of the following bonds has the longest duration?

Immunization through duration matching of assets and liabilities may be ineffective or inappropriate because

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?

Duration is important in bond portfolio management becauseI) 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.

The duration of a perpetuity with a yield of 6.5% is

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 10%, 30-year corporate bond was recently being priced to a yieldof 11%. The Macaulay duration for the bond is 11.3 years. Given this information, the bond's modified duration would be

A 6%, 30-year corporate bond was recently being priced to a yield of 7%. The Macaulay duration for the bond is 9.4 years. Given this information, the bond's modified duration would be

Holding other factors constant, the interest-rate risk of a coupon bond is higher when the bond's

The interest-rate risk of a bond is

Holding other factors constant, the interest-rate risk of a coupon bond is lower when the bond's