Reference no: EM131415412
True or False -
1) All else the same, a bond with a 2% coupon has more interest rate risk than one with a 6% coupon
2) The mortgage-backed securities (MBS) market ranks fourth in size behind US Treasury's, Corporates and Municipals.
3) Duration is the only good measure of a bonds sensitivity to interest rates.
4) Forward rates are market based expectations for rates in the future.
5) A callable bond is worth more to an investor than a non-callable bond.
Multiple Choices -
1) Which of the following bonds has the greatest interest rate risk? Which has the least?
A) A zero coupon 10 year bond yielding 4%
B) A 4% 10 year bond yielding 4 %
C) A 3% 10 year bond yielding 5%
D) A zero coupon 3 year bond yielding 6%
2) Which is an accurate statement regarding the duration on a bond?
A) Bond Duration is related to the price-yield relationship
B) A bond's duration changes as yields change
C) It is an approximation of the bond's interest rate risk
D) The actual duration of the bond will vary with its terms
E) All of the above
3) If a US investor is forecasting that the yield curve will invert over the next year they are most likely to:
A) Purchase bonds that have a longer duration
B) Buy short dated floating rate notes
C) Buy callable bond
Short Answer -
What is the value on March 1, 2017 of a 6% note maturing September 30, 2023 that pays semi-annually with:
A) A yield to maturity of 5%
B) A yield to maturity of 7%
C) What is the duration of the bond above?
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