完整word版投资学第7版Test Bank答案16.docx

1、完整word版投资学第7版Test Bank答案16Multiple Choice Questions 1. The duration of a bond is a function of the bonds A) coupon rate. B) yield to maturity. C) time to maturity. D) all of the above. E) none of the above. Answer: D Difficulty: Easy Rationale: Duration is calculated by discounting the bonds cash fl

2、ows at the bonds yield to maturity and, except for zero-coupon bonds, is always less than time to maturity. 2. Ceteris paribus, the duration of a bond is positively correlated with the bonds A) time to maturity. B) coupon rate. C) yield to maturity. D) all of the above. E) none of the above. Answer:

3、 A Difficulty: Moderate Rationale: Duration is negatively correlated with coupon rate and yield to maturity. 3. Holding other factors constant, the interest-rate risk of a coupon bond is higher when the bonds: A) term-to-maturity is lower. B) coupon rate is higher. C) yield to maturity is lower. D)

4、current yield is higher. E) none of the above. Answer: C Difficulty: Moderate Rationale: The longer the maturity, the greater the interest-rate risk. The lower the coupon rate, the greater the interest-rate risk. The lower the yield to maturity, the greater the interest-rate risk. These concepts are

5、 reflected in the duration rules; duration is a measure of bond price sensitivity to interest rate changes (interest-rate risk). 4. The modified duration used by practitioners is equal to the Macaulay duration A) times the change in interest rate. B) times (one plus the bonds yield to maturity). C)

6、divided by (one minus the bonds yield to maturity). D) divided by (one plus the bonds yield to maturity). E) none of the above. Answer: D Difficulty: Moderate Rationale: D* = D/(1 + y) 5. Given the time to maturity, the duration of a zero-coupon bond is higher when the discount rate is A) higher. B)

7、 lower. C) equal to the risk free rate. D) The bonds duration is independent of the discount rate. E) none of the above. Answer: D Difficulty: Moderate Rationale: The duration of a zero-coupon bond is equal to the maturity of the bond. 6. The interest-rate risk of a bond is A) the risk related to th

8、e possibility of bankruptcy of the bonds issuer. B) the risk that arises from the uncertainty of the bonds return caused by changes in interest rates. C) the unsystematic risk caused by factors unique in the bond. D) A and B above. E) A, B, and C above. Answer: B Difficulty: Moderate Rationale: Chan

9、ging interest rates change the bonds return, both in terms of the price of the bond and the reinvestment of coupon payments. 7. Which of the following two bonds is more price sensitive to changes in interest rates? 1) A par value bond, X, with a 5-year-to-maturity and a 10% coupon rate.2) A zero-cou

10、pon bond, Y, with a 5-year-to-maturity and a 10% yield-to-maturity. A) Bond X because of the higher yield to maturity. B) Bond X because of the longer time to maturity. C) Bond Y because of the longer duration. D) Both have the same sensitivity because both have the same yield to maturity. E) None o

11、f the above Answer: C Difficulty: Moderate Rationale: Duration is the best measure of bond price sensitivity; the longer the duration the higher the price sensitivity. 8. Holding other factors constant, which one of the following bonds has the smallest price volatility? A) 5-year, 0% coupon bond B)

12、5-year, 12% coupon bond C) 5 year, 14% coupon bond D) 5-year, 10% coupon bond E) Cannot tell from the information given. Answer: C Difficulty: Moderate Rationale: Duration (and thus price volatility) is lower when the coupon rates are higher. 9. Which of the following is not true? A) Holding other t

13、hings constant, the duration of a bond increases with time to maturity. B) Given time to maturity, the duration of a zero-coupon decreases with yield to maturity. C) Given time to maturity and yield to maturity, the duration of a bond is higher when the coupon rate is lower. D) Duration is a better

14、measure of price sensitivity to interest rate changes than is time to maturity. E) All of the above. Answer: B Difficulty: Moderate Rationale: The duration of a zero-coupon bond is equal to time to maturity, and is independent of yield to maturity. 10. The duration of a 5-year zero-coupon bond is A)

15、 smaller than 5. B) larger than 5. C) equal to 5. D) equal to that of a 5-year 10% coupon bond. E) none of the above. Answer: C Difficulty: Easy Rationale: Duration of a zero-coupon bond equals the bonds maturity. 11. The basic purpose of immunization is to A) eliminate default risk. B) produce a ze

16、ro net interest-rate risk. C) offset price and reinvestment risk. D) A and B. E) B and C. Answer: E Difficulty: Moderate Rationale: When a portfolio is immunized, price risk and reinvestment risk exactly offset each other resulting in zero net interest-rate risk. 12. The duration of a par value bond

17、 with a coupon rate of 8% and a remaining time to maturity of 5 years is A) 5 years. B) 5.4 years. C) 4.17 years. D) 4.31 years. E) none of the above. Answer: D Difficulty: Moderate Rationale: Calculations are shown below.Yr.CFPV of CF08%Weight * Yr.1$80$80/1.08 = $74.070.0741 * 1 = 0.07412$80$80/(1

18、.08)2 = $68.590.0686 * 2 = 0.13723$80$80/(1.08)3 = $63.510.0635 * 3 = 0.19054$80$80/(1.08)4 = $58.800.0588 * 4 = 0.23525$1,080$1,080/(1.08)5 = $735.030.7350 * 5 = 3.6750Sum$1000.004.3120 yrs. (duration) 13. The duration of a perpetuity with a yield of 8% is A) 13.50 years. B) 12.11 years. C) 6.66 ye

19、ars. D) cannot be determined. E) none of the above. Answer: A Difficulty: Easy Rationale: D = 1.08/0.08 = 13.50 years. 14. A seven-year par value bond has a coupon rate of 9% and a modified duration of A) 7 years. B) 5.49 years. C) 5.03 years. D) 4.87 years. E) none of the above. Answer: C Difficult

20、y: Difficult Rationale: Calculations are shown below.Yr.CFPV of CF9%Weight * Yr.1$90$82.570.0826 X 1 = 0.08262$90$75.750.0758 X 2 = 0.15163$90$69.500.0695 X 3 = 0.20854$90$63.760.0638 X 4 = 0.25525$90$58.490.0585 X 5 = 0.29256$90$53.660.0537 X 6 = 0.32227$1,090$596.260.5963 X 7 = 4.1741Sum$1000.005.

21、4867 years (duration)modified duration = 5.4867 years/1.09 = 5.03 years. 15. Par value bond XYZ has a modified duration of 6. Which one of the following statements regarding the bond is true? A) If the market yield increases by 1% the bonds price will decrease by $60. B) If the market yield increase

22、s by 1% the bonds price will increase by $50. C) If the market yield increases by 1% the bonds price will decrease by $50. D) If the market yield increases by 1% the bonds price will increase by $60. E) None of the above. Answer: A Difficulty: Moderate Rationale: = -D*-$60 = -6(0.01) X $1,000 16. Wh

23、ich of the following bonds has the longest duration? A) An 8-year maturity, 0% coupon bond. B) An 8-year maturity, 5% coupon bond. C) A 10-year maturity, 5% coupon bond. D) A 10-year maturity, 0% coupon bond. E) Cannot tell from the information given. Answer: D Difficulty: Moderate Rationale: The lo

24、nger the maturity and the lower the coupon, the greater the duration 17. 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? A) The bond with a duration of 6 years. B) The bond with a duration of 5 years. C) The bo

25、nd with a duration of 2.7 years. D) The bond with a duration of 5.15 years. E) None of the above. Answer: D Difficulty: Difficult Rationale: DP/P = -D X D(1+y) / (1+y); -.023 = -D X .005 / 1.12; D = 5.15. 18. Which one of the following statements is true concerning the duration of a perpetuity? A) T

26、he duration of 15% yield perpetuity that pays $100 annually is longer than that of a 15% yield perpetuity that pays $200 annually. B) The duration of a 15% yield perpetuity that pays $100 annually is shorter than that of a 15% yield perpetuity that pays $200 annually. C) The duration of a 15% yield

27、perpetuity that pays $100 annually is equal to that of 15% yield perpetuity that pays $200 annually. D) the duration of a perpetuity cannot be calculated. E) None of the above. Answer: C Difficulty: Easy Rationale: Duration of a perpetuity = (1 + y)/y; thus, the duration of a perpetuity is determine

28、d by the yield and is independent of the cash flow. 19. The two components of interest-rate risk are A) price risk and default risk. B) reinvestment risk and systematic risk. C) call risk and price risk. D) price risk and reinvestment risk. E) none of the above. Answer: D Difficulty: Easy Rationale:

29、 Default, systematic, and call risks are not part of interest-rate risk. Only price and reinvestment risks are part of interest-rate risk. 20. The duration of a coupon bond A) does not change after the bond is issued. B) can accurately predict the price change of the bond for any interest rate chang

30、e. C) will decrease as the yield to maturity decreases. D) all of the above are true. E) none of the above is true. Answer: E Difficulty: Easy Rationale: Duration changes as interest rates and time to maturity change, can only predict price changes accurately for small interest rate changes, and inc

31、reases as the yield to maturity decreases. 21. Indexing of bond portfolios is difficult because A) the number of bonds included in the major indexes is so large that it would be difficult to purchase them in the proper proportions. B) many bonds are thinly traded so it is difficult to purchase them at a fair market price