Question 1

A $100 000 bond has a term to maturity of one year,with half-yearly coupons set at 12% p.a.Calculate the convexity of the bond in periods if the yield is 9%.

Accepted Answer

A)  $ 2.576 $ 
B)  $ 2.888 $ 
C)  $ 3.227 $ 
D)  $ 4.672 $ 
A)  $ 2.576 $ 
B)  $ 2.888 $ 
C)  $ 3.227 $ 
D)  $ 4.672 $ B

Question 2

Suppose a two-year 9% p.a.bond with a face value of $100 000 has a yield of 8% p.a.What is the price of this bond provided it pays semi-annual coupons?

Accepted Answer

A)  $ \$ 98  \quad 206.24 $ 
B)  $ \$ 100  \quad 719.11 $ 
C)  $ \$ 101  \quad 814.95 $ 
D)  $ \$ 101  \quad 937.34 $ 
A)  $ \$ 98  \quad 206.24 $ 
B)  $ \$ 100  \quad 719.11 $ 
C)  $ \$ 101  \quad 814.95 $ 
D)  $ \$ 101  \quad 937.34 $ C

Question 3

A $500 000 bond has a term to maturity of one year,with half-yearly coupons set at 8% p.a.Calculate the convexity of the bond in periods if the yield is 8%.

Accepted Answer

A)  $ 2.576 $ 
B)  $ 2.923 $ 
C)  $ 3.227 $ 
D)  $ 4.672 $ 
A)  $ 2.576 $ 
B)  $ 2.923 $ 
C)  $ 3.227 $ 
D)  $ 4.672 $ B

Question 4

Calculate the price of a coupon-paying bond maturing in two years,where the bond has a face value of $100 000,yield of 6% p.a.and coupon rate of 8% p.a.Assume interest rates are paid half yearly and the last coupon payment has just been made.

Accepted Answer

A)  $ \$ 103  \quad 761 $ 
B)  $ \$ 103  \quad 717 $ 
C)  $ \$ 102  \quad 386 $ 
D)  $ \$ 102  \quad 783 $ 
A)  $ \$ 103  \quad 761 $ 
B)  $ \$ 103  \quad 717 $ 
C)  $ \$ 102  \quad 386 $ 
D)  $ \$ 102  \quad 783 $

Question 5

Calculate the convexity (measured in six-monthly periods)for a coupon-paying bond maturing in two years,where the bond has a face value of $100 000,yield of 5% p.a.and coupon rate of 7% p.a.Assume interest rates are paid half yearly and the last coupon payment has just been made.

Accepted Answer

A)  $ 1.85 $ 
B)  $ 3.66 $ 
C)  $ 9.35 $ 
D)  $ 10.26 $ 
A)  $ 1.85 $ 
B)  $ 3.66 $ 
C)  $ 9.35 $ 
D)  $ 10.26 $

Question 6

Calculate the duration (measured in six-monthly periods)for a coupon-paying bond maturing in two years,where the bond has a face value of $100 000,yield of 7% p.a.and coupon rate of 9% p.a.Assume interest rates are paid half yearly and the last coupon payment has just been made.

Accepted Answer

A)  $ 3.65 $ 
B)  $ 3.81 $ 
C)  $ 3.48 $ 
D)  $ 3.91 $ 
A)  $ 3.65 $ 
B)  $ 3.81 $ 
C)  $ 3.48 $ 
D)  $ 3.91 $

Question 7

Index-linked bonds are necessarily linked to the Consumer Price Index.

Accepted Answer

A) True 
 B)False

Question 8

Assume you currently hold a one-year bond with a face value of $100 000,which has a coupon rate of 8% p.a.If the yield changes from 12% p.a.to 14% p.a. ,what is the change in the duration of the bond?

Accepted Answer

A)  $ -0.001 $ 
B)  $ 0.001 $ 
C)  $ -0.010 $ 
D)  $ 0.004 $ 
A)  $ -0.001 $ 
B)  $ 0.001 $ 
C)  $ -0.010 $ 
D)  $ 0.004 $

Question 9

A $100 000 bond has a term to maturity of two years,with half-yearly coupons set at 13% p.a.Calculate the duration of the bond in periods if the yield is 9%.

Accepted Answer

A)  $ 3.659 $ 
B)  $ 3.731 $ 
C)  $ 3.812 $ 
D)  $ 3.825 $ 
A)  $ 3.659 $ 
B)  $ 3.731 $ 
C)  $ 3.812 $ 
D)  $ 3.825 $

Question 10

A $100 000 bond has a term to maturity of one year,with half-yearly coupons set at 10% p.a.Calculate the duration of the bond in periods if the yield is 9%.

Accepted Answer

A)  $ 1.702 $ 
B)  $ 1.882 $ 
C)  $ 1.953 $ 
D)  $ 2.000 $ 
A)  $ 1.702 $ 
B)  $ 1.882 $ 
C)  $ 1.953 $ 
D)  $ 2.000 $

Question 11

The value of a bond measured at a duration date will vary with a change in the yield.

Accepted Answer

A) True 
 B)False

Question 12

A $50 000 bond has a term to maturity of 20 years with half-yearly coupons set at 7% p.a.Calculate the change in bond price if the yield changes from 8.5% to 8%.

Accepted Answer

A)  $ -\$ 1625.42 $ 
B)  $ -\$ 1586.81 $ 
C)  $ \$ 1587.81 $ 
D)  $ \$ 1625.42 $ 
A)  $ -\$ 1625.42 $ 
B)  $ -\$ 1586.81 $ 
C)  $ \$ 1587.81 $ 
D)  $ \$ 1625.42 $

Question 13

Duration is a concept that is useful in assessing a bond's credit risk.

Accepted Answer

A) True 
 B)False

Question 14

A $500 000 bond has a term to maturity of one year,with half-yearly coupons set at 8% p.a.Calculate the duration of the bond in periods if the yield is 8%.

Accepted Answer

A)  $ 1.702 $ 
B)  $ 1.882 $ 
C)  $ 1.962 $ 
D)  $ 2.000 $ 
A)  $ 1.702 $ 
B)  $ 1.882 $ 
C)  $ 1.962 $ 
D)  $ 2.000 $

Question 15

Suppose a two-year 9% p.a.bond with a face value of $100 000 has a yield of 8% p.a.What is the convexity of this bond?

Accepted Answer

A)  $ 9.174 $ 
B)  $ 9.334 $ 
C)  $ 9.627 $ 
D)  $ 9.901 $ 
A)  $ 9.174 $ 
B)  $ 9.334 $ 
C)  $ 9.627 $ 
D)  $ 9.901 $

Question 16

Bond A has a price of $97 635 and a duration of 1.93.Bond B has a price of $54 696 and has a duration of 3.46.Calculate the duration of a portfolio comprised of one of Bond A and one of Bond B.

Accepted Answer

A)  $ 2.4794 $ 
B)  $ 2.5511 $ 
C)  $ 2.6638 $ 
D)  $ 2.6842 $ 
A)  $ 2.4794 $ 
B)  $ 2.5511 $ 
C)  $ 2.6638 $ 
D)  $ 2.6842 $

Question 17

Assume a three-year bond has a duration of 4.102 semi-annual compounding periods and a value of $105 991.21.Further,the yield on the bond instantaneously increases from 6.5% to 6.7%.What is the proportional decrease in the bond price?

Accepted Answer

A)  $ \$ 417.24 $ 
B)  $ \$ 421.09 $ 
C)  $ \$ 437.61 $ 
D)  $ \$ 499.43 $ 
A)  $ \$ 417.24 $ 
B)  $ \$ 421.09 $ 
C)  $ \$ 437.61 $ 
D)  $ \$ 499.43 $

Question 18

Consider a bond with a current price of $98 320,a duration measure of 2 and a convexity measure of 3.5.The approximate dollar change in price predicted from proportional change in 1 plus the yield (i.e.(1 + y))of 0.005 is more than $1000.

Accepted Answer

A) True 
 B)False

Question 19

A $100 000 bond has a term to maturity of six years with half-yearly coupons set at 6% p.a.Calculate the bond price if the yield is 7.5%.

Accepted Answer

A)  $ \$ 91  \quad 327.88 $ 
B)  $ \$ 92  \quad 447.23 $ 
C)  $ \$ 92  \quad 857.98 $ 
D)  $ \$ 93  \quad 231.96 $ 
A)  $ \$ 91  \quad 327.88 $ 
B)  $ \$ 92  \quad 447.23 $ 
C)  $ \$ 92  \quad 857.98 $ 
D)  $ \$ 93  \quad 231.96 $

Question 20

Given a bond with a duration measure of 2 and a convexity measure of 3.5,then the approximate percentage change in price predicted from a proportional change in 1 plus the yield of 0.005 (i.e.(1 + y))is 0.991%.

Accepted Answer

A) True 
 B)False

A $100 000 bond has a term to maturity of one year,with half-yearly coupons set at 12% p.a.Calculate the convexity of the bond in periods if the yield is 9%.

Suppose a two-year 9% p.a.bond with a face value of $100 000 has a yield of 8% p.a.What is the price of this bond provided it pays semi-annual coupons?

A $500 000 bond has a term to maturity of one year,with half-yearly coupons set at 8% p.a.Calculate the convexity of the bond in periods if the yield is 8%.

Calculate the price of a coupon-paying bond maturing in two years,where the bond has a face value of $100 000,yield of 6% p.a.and coupon rate of 8% p.a.Assume interest rates are paid half yearly and the last coupon payment has just been made.

Calculate the convexity (measured in six-monthly periods)for a coupon-paying bond maturing in two years,where the bond has a face value of $100 000,yield of 5% p.a.and coupon rate of 7% p.a.Assume interest rates are paid half yearly and the last coupon payment has just been made.

Calculate the duration (measured in six-monthly periods)for a coupon-paying bond maturing in two years,where the bond has a face value of $100 000,yield of 7% p.a.and coupon rate of 9% p.a.Assume interest rates are paid half yearly and the last coupon payment has just been made.

Index-linked bonds are necessarily linked to the Consumer Price Index.

Assume you currently hold a one-year bond with a face value of $100 000,which has a coupon rate of 8% p.a.If the yield changes from 12% p.a.to 14% p.a. ,what is the change in the duration of the bond?

A $100 000 bond has a term to maturity of two years,with half-yearly coupons set at 13% p.a.Calculate the duration of the bond in periods if the yield is 9%.

A $100 000 bond has a term to maturity of one year,with half-yearly coupons set at 10% p.a.Calculate the duration of the bond in periods if the yield is 9%.

The value of a bond measured at a duration date will vary with a change in the yield.

A $50 000 bond has a term to maturity of 20 years with half-yearly coupons set at 7% p.a.Calculate the change in bond price if the yield changes from 8.5% to 8%.

Duration is a concept that is useful in assessing a bond's credit risk.

A $500 000 bond has a term to maturity of one year,with half-yearly coupons set at 8% p.a.Calculate the duration of the bond in periods if the yield is 8%.

Suppose a two-year 9% p.a.bond with a face value of $100 000 has a yield of 8% p.a.What is the convexity of this bond?

Bond A has a price of $97 635 and a duration of 1.93.Bond B has a price of $54 696 and has a duration of 3.46.Calculate the duration of a portfolio comprised of one of Bond A and one of Bond B.

Assume a three-year bond has a duration of 4.102 semi-annual compounding periods and a value of $105 991.21.Further,the yield on the bond instantaneously increases from 6.5% to 6.7%.What is the proportional decrease in the bond price?

Consider a bond with a current price of $98 320,a duration measure of 2 and a convexity measure of 3.5.The approximate dollar change in price predicted from proportional change in 1 plus the yield (i.e.(1 + y))of 0.005 is more than $1000.

A $100 000 bond has a term to maturity of six years with half-yearly coupons set at 6% p.a.Calculate the bond price if the yield is 7.5%.

Given a bond with a duration measure of 2 and a convexity measure of 3.5,then the approximate percentage change in price predicted from a proportional change in 1 plus the yield of 0.005 (i.e.(1 + y))is 0.991%.

The Investment Decision

Australian Financial Markets

The International Investment Environment

Financial Management: Derivative Instruments and Information Sources

Money Market Securities

Investor Preferences and Portfolio Concepts

Risky Asset Pricing Models and the Capm

Alternative Risky Asset Pricing Models

Concepts and Applications of Market Efficiency

Equity Valuation Models

Macro- and Industry Analysis of Share Markets

Qualitative Stock Selection

Quantitative Company Analysis

Futures and Forward Contracts

Option Contracts

Advanced Issues in Options

Alternative Investments

Portfolio Management

Performance Evaluation of Managed Funds

Filters

Exam 6: Bonds

A $100 000 bond has a term to maturity of one year,with half-yearly coupons set at 12% p.a.Calculate the convexity of the bond in periods if the yield is 9%.

Suppose a two-year 9% p.a.bond with a face value of $100 000 has a yield of 8% p.a.What is the price of this bond provided it pays semi-annual coupons?

A $500 000 bond has a term to maturity of one year,with half-yearly coupons set at 8% p.a.Calculate the convexity of the bond in periods if the yield is 8%.

Calculate the price of a coupon-paying bond maturing in two years,where the bond has a face value of $100 000,yield of 6% p.a.and coupon rate of 8% p.a.Assume interest rates are paid half yearly and the last coupon payment has just been made.

Calculate the convexity (measured in six-monthly periods)for a coupon-paying bond maturing in two years,where the bond has a face value of $100 000,yield of 5% p.a.and coupon rate of 7% p.a.Assume interest rates are paid half yearly and the last coupon payment has just been made.

Calculate the duration (measured in six-monthly periods)for a coupon-paying bond maturing in two years,where the bond has a face value of $100 000,yield of 7% p.a.and coupon rate of 9% p.a.Assume interest rates are paid half yearly and the last coupon payment has just been made.

Index-linked bonds are necessarily linked to the Consumer Price Index.

Assume you currently hold a one-year bond with a face value of $100 000,which has a coupon rate of 8% p.a.If the yield changes from 12% p.a.to 14% p.a. ,what is the change in the duration of the bond?

A $100 000 bond has a term to maturity of two years,with half-yearly coupons set at 13% p.a.Calculate the duration of the bond in periods if the yield is 9%.

A $100 000 bond has a term to maturity of one year,with half-yearly coupons set at 10% p.a.Calculate the duration of the bond in periods if the yield is 9%.

The value of a bond measured at a duration date will vary with a change in the yield.

A $50 000 bond has a term to maturity of 20 years with half-yearly coupons set at 7% p.a.Calculate the change in bond price if the yield changes from 8.5% to 8%.

Duration is a concept that is useful in assessing a bond's credit risk.

A $500 000 bond has a term to maturity of one year,with half-yearly coupons set at 8% p.a.Calculate the duration of the bond in periods if the yield is 8%.

Suppose a two-year 9% p.a.bond with a face value of $100 000 has a yield of 8% p.a.What is the convexity of this bond?

Bond A has a price of $97 635 and a duration of 1.93.Bond B has a price of $54 696 and has a duration of 3.46.Calculate the duration of a portfolio comprised of one of Bond A and one of Bond B.

Assume a three-year bond has a duration of 4.102 semi-annual compounding periods and a value of $105 991.21.Further,the yield on the bond instantaneously increases from 6.5% to 6.7%.What is the proportional decrease in the bond price?

Consider a bond with a current price of $98 320,a duration measure of 2 and a convexity measure of 3.5.The approximate dollar change in price predicted from proportional change in 1 plus the yield (i.e.(1 + y))of 0.005 is more than $1000.

A $100 000 bond has a term to maturity of six years with half-yearly coupons set at 6% p.a.Calculate the bond price if the yield is 7.5%.

Given a bond with a duration measure of 2 and a convexity measure of 3.5,then the approximate percentage change in price predicted from a proportional change in 1 plus the yield of 0.005 (i.e.(1 + y))is 0.991%.

The Investment Decision

Australian Financial Markets

The International Investment Environment

Financial Management: Derivative Instruments and Information Sources

Money Market Securities

Investor Preferences and Portfolio Concepts

Risky Asset Pricing Models and the Capm

Alternative Risky Asset Pricing Models

Concepts and Applications of Market Efficiency

Equity Valuation Models

Macro- and Industry Analysis of Share Markets

Qualitative Stock Selection

Quantitative Company Analysis

Futures and Forward Contracts

Option Contracts

Advanced Issues in Options

Alternative Investments

Portfolio Management

Performance Evaluation of Managed Funds

Filters