答案和详解如下： 1.An investor gathered the following information on two U.S. corporate bonds: § Bond J is callable with maturity of 5 years § Bond J has a par value of $10,000 § Bond M is option-free with a maturity of 5 years § Bond M has a par value of $1,000 For each bond, which duration calculation should be applied? A) Effective Duration Effective Duration only B) Modified Duration Modified Duration or Effective Duration C) Modified Duration Effective Duration only D) Effective Duration Modified Duration or Effective Duration The correct answer was D) The duration computation remains the same. The only difference between modified and effective duration is that effective duration is used for bonds with embedded options. Modified duration assumes that all the cash flows on the bond will not change, while effective duration considers expected cash flow changes that may occur with embedded options. 2.Which of the following statements about duration is FALSE? A) The numerator of the effective duration formula assumes that market rates increase and decrease by the same number of basis points. B) Effective duration is the exact change in price due to a 100 basis point change in rates. C) Price volatility has a direct relationship with interest rate risk. D) For a specific bond, the effective duration formula results in a value of 8.80%. For a 50 basis point change in yield, the approximate change in price of the bond would be 4.40%. The correct answer was B) Effective duration is an approximation because the duration calculation ignores the curvature in the price/yield graph. 3.Which of the following statements about duration and convexity is FALSE? A) duration to first call is longer than duration to maturity. B) convexity of a callable bond is always lower than that of a noncallable bond when rates fall. C) callable bonds' convexity can be negative. D) option-adjusted duration cannot exceed duration to maturity. The correct answer was A) Duration to maturity is longer than duration to first call because one measure of duration is the time until maturity or until the bond is called. Since the time until the first call is shorter than if the bond was not called the duration to first call is shorter than duration to maturity. 4.When calculating duration, which of the following bonds would an investor least likely use effective duration on rather than modified duration? A) Callable bond. B) Option-free bond. C) Putable bond. D) Convertible bond. The correct answer was B) The duration computation remains the same. The only difference between modified and effective duration is that effective duration is used for bonds with embedded options. Modified duration assumes that all the cash flows on the bond will not change, while effective duration considers expected cash flow changes that may occur with embedded options. 5.A bond with an 8 percent semi-annual coupon and 10-year maturity is currently priced at $904.52 to yield 9.5 percent. If the yield declines to 9 percent, the bond’s price will increase to $934.96, and if the yield increases to 10 percent, the bond’s price will decrease to $875.38. Estimate the percentage price change for a 100 basis point change in rates. A) 4.35%. B) 2.13%. C) 8.41%. D) 6.58%. The correct answer was D) The formula for the percentage price change is: (price when yields fall – price when yields rise)/2 × (initial price) × 0.005 = ($934.96 – 875.38)/2($904.52)(0.005) = $59.58/$9.05 = 6.58%. Note that this formula is also referred to as the bond’s effective duration. | 
发表于 2008-5-15 17:07
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