答案和详解如下： 1.A bond has a modified duration of 6 and a convexity of 62.5. What happens to the bond's price if interest rates rise 25 basis points? It goes: A) down 1.46%. B) down 15.00%. C) up 4.00%. D) up 1.46%. The correct answer was A) ∆ = [(-MD*∆y) + (convexity)*(∆y)2]*100 ∆ = [(-6*0.0025) + (62.5)* (0.0025)2]*100 = -1.461% 2.Which of the following statements about the market yield environment is TRUE? A) As yields increase, bond prices rise, the price curve flattens, and further increases in yield have a smaller effect on bond prices. B) When yields fall, interest rate changes have a small impact on bond prices. C) Positive convexity applies to the percentage price change, not the absolute dollar price change. D) For a given change in interest rates, bond price sensitivity is lowest when market yields are already high. The correct answer was D) The price volatility of noncallable (option-free) bonds is inversely related to the level of market yields. In other words, when the yield level is high, bond price volatility is low and vice versa.
The statement beginning with, As yields increase. . . should continue . . .bond prices fall. The statement beginning with When yields fall. . . should continue, . . . changes have a large impact on prices. Positive convexity (bond prices increase faster than they decrease for a given change in yield) applies to both absolute dollar changes and percentage changes. 3.Assume that a straight bond has a duration of 1.89 and a convexity of 15.99. If interest rates decline by 1 percent what is the total estimated percentage price change of the bond? A) 1.56%. B) 1.89%. C) 2.05%. D) 15.99%. The correct answer was C) The total percentage price change estimate is computed as follows: Total estimated price change = -1.89 x (-0.01) x 100 + 15.99 x (-0.01)2 x 100 = 2.05% 4.An investor gathered the following information about an option-free U.S. corporate bond: § Par Value of $10 million § Convexity of 45 § Duration of 7 If interest rates increase 2 percent (200 basis points), the bond’s percentage price change is closest to: A) -14.0%. B) -15.8%. C) -12.2%. D) -1.4%. The correct answer was C) Recall that the percentage change in prices = Duration effect + Convexity effect = [-duration * (change in yields)] plus [convexity * (change in yields)2] = [(-7)(0.02) + (45)(0.02) 2] = -0.12 = -12.2%. Remember that you must use the decimal representation of the change in interest rates when computing the duration and convexity adjustments. 5.A bond’s duration is 4.5 and its convexity is 43.6. If interest rates rise 100 basis points, the bond’s percentage price change is closest to: A) -4.94%. B) -4.50%. C) -3.91%. D) -4.06%. The correct answer was D) Recall that the percentage change in prices = Duration effect + Convexity effect = [-duration * (change in yields)] plus [convexity * (change in yields)2] = (-4.5)(0.01) + (43.6)(0.01) 2 = -4.06%. Remember that you must use the decimal representation of the change in interest rates when computing the duration and convexity adjustments. | 
发表于 2008-5-15 17:23
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