投资学第7版testbank答案16.docx

投资学第7版testbank答案16.docx

《投资学第7版testbank答案16.docx》由会员分享，可在线阅读，更多相关《投资学第7版testbank答案16.docx（36页珍藏版）》请在冰点文库上搜索。

投资学第7版testbank答案16

MultipleChoiceQuestions

1.Thedurationofabondisafunctionofthebond's

A）couponrate.

B）yieldtomaturity.

C）timetomaturity.

D）alloftheabove.

E）noneoftheabove.

Answer:

DDifficulty:

Easy

Rationale:

Durationiscalculatedbydiscountingthebond'scashflowsatthebond'syieldtomaturityand,exceptforzero-couponbonds,isalwayslessthantimetomaturity.

2.Ceterisparibus,thedurationofabondispositivelycorrelatedwiththebond's

A）timetomaturity.

B）couponrate.

C）yieldtomaturity.

D）alloftheabove.

E）noneoftheabove.

Answer:

ADifficulty:

Moderate

Rationale:

Durationisnegativelycorrelatedwithcouponrateandyieldtomaturity.

3.Holdingotherfactorsconstant,theinterest-rateriskofacouponbondishigherwhenthebond's:

A）term-to-maturityislower.

B）couponrateishigher.

C）yieldtomaturityislower.

D）currentyieldishigher.

E）noneoftheabove.

Answer:

CDifficulty:

Moderate

Rationale:

Thelongerthematurity,thegreatertheinterest-raterisk.Thelowerthecouponrate,thegreatertheinterest-raterisk.Thelowertheyieldtomaturity,thegreatertheinterest-raterisk.Theseconceptsarereflectedinthedurationrules;durationisameasureofbondpricesensitivitytointerestratechanges（interest-raterisk）.

4.The"modifiedduration"usedbypractitionersisequaltotheMacaulayduration

A）timesthechangeininterestrate.

B）times（oneplusthebond'syieldtomaturity）.

C）dividedby（oneminusthebond'syieldtomaturity）.

D）dividedby（oneplusthebond'syieldtomaturity）.

E）noneoftheabove.

Answer:

DDifficulty:

Moderate

Rationale:

D*=D/（1+y）

5.Giventhetimetomaturity,thedurationofazero-couponbondishigherwhenthediscountrateis

A）higher.

B）lower.

C）equaltotheriskfreerate.

D）Thebond'sdurationisindependentofthediscountrate.

E）noneoftheabove.

Answer:

DDifficulty:

Moderate

Rationale:

Thedurationofazero-couponbondisequaltothematurityofthebond.

6.Theinterest-rateriskofabondis

A）theriskrelatedtothepossibilityofbankruptcyofthebond'sissuer.

B）theriskthatarisesfromtheuncertaintyofthebond'sreturncausedbychangesininterestrates.

C）theunsystematicriskcausedbyfactorsuniqueinthebond.

D）AandBabove.

E）A,B,andCabove.

Answer:

BDifficulty:

Moderate

Rationale:

Changinginterestrateschangethebond'sreturn,bothintermsofthepriceofthebondandthereinvestmentofcouponpayments.

7.Whichofthefollowingtwobondsismorepricesensitivetochangesininterestrates

1）Aparvaluebond,X,witha5-year-to-maturityanda10%couponrate.

2）Azero-couponbond,Y,witha5-year-to-maturityanda10%yield-to-maturity.

A）BondXbecauseofthehigheryieldtomaturity.

B）BondXbecauseofthelongertimetomaturity.

C）BondYbecauseofthelongerduration.

D）Bothhavethesamesensitivitybecausebothhavethesameyieldtomaturity.

E）Noneoftheabove

Answer:

CDifficulty:

Moderate

Rationale:

Durationisthebestmeasureofbondpricesensitivity;thelongerthedurationthehigherthepricesensitivity.

8.Holdingotherfactorsconstant,whichoneofthefollowingbondshasthesmallestpricevolatility

A）5-year,0%couponbond

B）5-year,12%couponbond

C）5year,14%couponbond

D）5-year,10%couponbond

E）Cannottellfromtheinformationgiven.

Answer:

CDifficulty:

Moderate

Rationale:

Duration（andthuspricevolatility）islowerwhenthecouponratesarehigher.

9.Whichofthefollowingisnottrue

A）Holdingotherthingsconstant,thedurationofabondincreaseswithtimetomaturity.

B）Giventimetomaturity,thedurationofazero-coupondecreaseswithyieldtomaturity.

C）Giventimetomaturityandyieldtomaturity,thedurationofabondishigherwhenthecouponrateislower.

D）Durationisabettermeasureofpricesensitivitytointerestratechangesthanistimetomaturity.

E）Alloftheabove.

Answer:

BDifficulty:

Moderate

Rationale:

Thedurationofazero-couponbondisequaltotimetomaturity,andisindependentofyieldtomaturity.

10.Thedurationofa5-yearzero-couponbondis

A）smallerthan5.

B）largerthan5.

C）equalto5.

D）equaltothatofa5-year10%couponbond.

E）noneoftheabove.

Answer:

CDifficulty:

Easy

Rationale:

Durationofazero-couponbondequalsthebond'smaturity.

11.Thebasicpurposeofimmunizationisto

A）eliminatedefaultrisk.

B）produceazeronetinterest-raterisk.

C）offsetpriceandreinvestmentrisk.

D）AandB.

E）BandC.

Answer:

EDifficulty:

Moderate

Rationale:

Whenaportfolioisimmunized,priceriskandreinvestmentriskexactlyoffseteachotherresultinginzeronetinterest-raterisk.

12.Thedurationofaparvaluebondwithacouponrateof8%andaremainingtimetomaturityof5yearsis

A）5years.

B）years.

C）years.

D）years.

E）noneoftheabove.

Answer:

DDifficulty:

Moderate

Rationale:

Calculationsareshownbelow.

Yr.

CF

PVofCF@08%

Weight*Yr.

1

$80

$80/=$

*1=

2

$80

$80/2=$

*2=

3

$80

$80/3=$

*3=

4

$80

$80/4=$

*4=

5

$1,080

$1,080/5=$

*5=

Sum

$

yrs.（duration）

13.Thedurationofaperpetuitywithayieldof8%is

A）years.

B）years.

C）years.

D）cannotbedetermined.

E）noneoftheabove.

Answer:

ADifficulty:

Easy

Rationale:

D==years.

14.Aseven-yearparvaluebondhasacouponrateof9%andamodifieddurationof

A）7years.

B）years.

C）years.

D）years.

E）noneoftheabove.

Answer:

CDifficulty:

Difficult

Rationale:

Calculationsareshownbelow.

Yr.

CF

PVofCF@9%

Weight*Yr.

1

$90

$

X1=

2

$90

$

X2=

3

$90

$

X3=

4

$90

$

X4=

5

$90

$

X5=

6

$90

$

X6=

7

$1,090

$

X7=

Sum

$

years（duration）

modifiedduration=years/=years.

15.ParvaluebondXYZhasamodifieddurationof6.Whichoneofthefollowingstatementsregardingthebondistrue

A）Ifthemarketyieldincreasesby1%thebond'spricewilldecreaseby$60.

B）Ifthemarketyieldincreasesby1%thebond'spricewillincreaseby$50.

C）Ifthemarketyieldincreasesby1%thebond'spricewilldecreaseby$50.

D）Ifthemarketyieldincreasesby1%thebond'spricewillincreaseby$60.

E）Noneoftheabove.

Answer:

ADifficulty:

Moderate

Rationale:

=-D*-$60=-6X$1,000

16.Whichofthefollowingbondshasthelongestduration

A）An8-yearmaturity,0%couponbond.

B）An8-yearmaturity,5%couponbond.

C）A10-yearmaturity,5%couponbond.

D）A10-yearmaturity,0%couponbond.

E）Cannottellfromtheinformationgiven.

Answer:

DDifficulty:

Moderate

Rationale:

Thelongerthematurityandthelowerthecoupon,thegreatertheduration

17.Whichoneofthefollowingparvalue12%couponbondsexperiencesapricechangeof$23whenthemarketyieldchangesby50basispoints

A）Thebondwithadurationof6years.

B）Thebondwithadurationof5years.

C）Thebondwithadurationofyears.

D）Thebondwithadurationofyears.

E）Noneoftheabove.

Answer:

DDifficulty:

Difficult

Rationale:

DP/P=-DX[D（1+y）/（1+y）];=-DX[.005/];D=.

18.Whichoneofthefollowingstatementsistrueconcerningthedurationofaperpetuity

A）Thedurationof15%yieldperpetuitythatpays$100annuallyislongerthanthatofa15%yieldperpetuitythatpays$200annually.

B）Thedurationofa15%yieldperpetuitythatpays$100annuallyisshorterthanthatofa15%yieldperpetuitythatpays$200annually.

C）Thedurationofa15%yieldperpetuitythatpays$100annuallyisequaltothatof15%yieldperpetuitythatpays$200annually.

D）thedurationofaperpetuitycannotbecalculated.

E）Noneoftheabove.

Answer:

CDifficulty:

Easy

Rationale:

Durationofaperpetuity=（1+y）/y;thus,thedurationofaperpetuityisdeterminedbytheyieldandisindependentofthecashflow.

19.Thetwocomponentsofinterest-rateriskare

A）priceriskanddefaultrisk.

B）reinvestmentriskandsystematicrisk.

C）callriskandpricerisk.

D）priceriskandreinvestmentrisk.

E）noneoftheabove.

Answer:

DDifficulty:

Easy

Rationale:

Default,systematic,andcallrisksarenotpartofinterest-raterisk.Onlypriceandreinvestmentrisksarepartofinterest-raterisk.

20.Thedurationofacouponbond

A）doesnotchangeafterthebondisissued.

B）canaccuratelypredictthepricechangeofthebondforanyinterestratechange.

C）willdecreaseastheyieldtomaturitydecreases.

D）alloftheabovearetrue.

E）noneoftheaboveistrue.

Answer:

EDifficulty:

Easy

Rationale:

Durationchangesasinterestratesandtimetomaturitychange,canonlypredictpricechangesaccuratelyforsmallinterestratechanges,andincreasesastheyieldtomaturitydecreases.

21.Indexingofbondportfoliosisdifficultbecause

A）thenumberofbondsincludedinthemajorindexesissolargethatitwouldbedifficulttopurchasethemintheproperproportions.

B）manybondsarethinlytradedsoitisdifficulttopurchasethematafairmarketprice.

C）thecompositionofbondindexesisconstantlychanging.

D）alloftheabovearetrue.

E）bothAandBaretrue.

Answer:

DDifficulty:

Moderate

Rationale:

Alloftheabovearetruestatementsaboutbondindexes.

22.Youhaveanobligationtopay$1,488infouryearsand2months.Inwhichbondwouldyouinvestyour$1,000toaccumulatethisamount,withr