Question 1

Because of convexity,when interest rates change the actual bond price will ____________ the bond price predicted by duration.

Accepted Answer

A)  always be higher than 
B)  sometimes be higher than 
C)  always be lower than 
D)  sometimes be lower than 
A)  always be higher than 
B)  sometimes be higher than 
C)  always be lower than 
D)  sometimes be lower than

Question 2

All else equal,bond price volatility is greater for __________.

Accepted Answer

A)  higher coupon rates 
B)  lower coupon rates 
C)  shorter maturity 
D)  lower default risk 
A)  higher coupon rates 
B)  lower coupon rates 
C)  shorter maturity 
D)  lower default risk

Question 3

Immunization of coupon paying bonds is not a passive strategy because
I.the portfolio must be rebalanced every time interest rates change
II.the portfolio must be rebalanced over time even if interest rates don't change
III.convexity implies duration based immunization strategies don't work

Accepted Answer

A)  I only 
B)  I and II only 
C)  II only 
D)  I, II and III 
A)  I only 
B)  I and II only 
C)  II only 
D)  I, II and III

Question 4

Duration facilitates the comparison of bonds with differing ___________.

Accepted Answer

A)  default risk 
B)  conversion ratios 
C)  maturities 
D)  yields to maturity 
A)  default risk 
B)  conversion ratios 
C)  maturities 
D)  yields to maturity

Question 5

You have purchased a Guaranteed Investment contracts (GICs)from an insurance firm that promises to pay you a 5% compound rate of return per year for 6 years.If you pay $10,000 for the GIC today and receive no interest along the way you will get __________ in 6 years (to the nearest dollar).

Accepted Answer

A)  $12,565 
B)  $13,000 
C)  $13,401 
D)  $13,676 
A)  $12,565 
B)  $13,000 
C)  $13,401 
D)  $13,676

Because of convexity,when interest rates change the actual bond price will ____________ the bond price predicted by duration.

All else equal,bond price volatility is greater for __________.

Immunization of coupon paying bonds is not a passive strategy because I.the portfolio must be rebalanced every time interest rates change II.the portfolio must be rebalanced over time even if interest rates don't change III.convexity implies duration based immunization strategies don't work

Duration facilitates the comparison of bonds with differing ___________.

You have purchased a Guaranteed Investment contracts (GICs)from an insurance firm that promises to pay you a 5% compound rate of return per year for 6 years.If you pay $10,000 for the GIC today and receive no interest along the way you will get __________ in 6 years (to the nearest dollar).

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yields

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Portfolio Performance Evaluation

Globalization and International Investing

Hedge Funds

Taxes,inflation,and Investment Strategy

Investors and the Investment Process

Filters

Exam 11: Managing Bond Portfolios

Because of convexity,when interest rates change the actual bond price will ____________ the bond price predicted by duration.

All else equal,bond price volatility is greater for __________.

Immunization of coupon paying bonds is not a passive strategy because I.the portfolio must be rebalanced every time interest rates change II.the portfolio must be rebalanced over time even if interest rates don't change III.convexity implies duration based immunization strategies don't work

Duration facilitates the comparison of bonds with differing ___________.

You have purchased a Guaranteed Investment contracts (GICs)from an insurance firm that promises to pay you a 5% compound rate of return per year for 6 years.If you pay $10,000 for the GIC today and receive no interest along the way you will get __________ in 6 years (to the nearest dollar).

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yields

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Portfolio Performance Evaluation

Globalization and International Investing

Hedge Funds

Taxes,inflation,and Investment Strategy

Investors and the Investment Process

Filters