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Q4. What is the value of Bond 4 if 3-month rates remain constant and all other rates increase by 135 basis points? ffice ffice" />
A) $250,000.00.
B) $229,750.00.
C) $243,375.00.
Correct answer is A)
|
Key Rate Durations |
|
Issue |
Value ($1,000's) |
weight |
3 mo |
2 yr |
5 yr |
10 yr |
15 yr |
20 yr |
25 yr |
30 yr |
Effective Duration |
|
Bond 1 |
100 |
0.10 |
0.03 |
0.14 |
0.49 |
1.35 |
1.71 |
1.59 |
1.47 |
4.62 |
11.4 |
|
Bond 2 |
200 |
0.20 |
0.02 |
0.13 |
1.47 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
1.62 |
|
Bond 3 |
150 |
0.15 |
0.03 |
0.14 |
0.51 |
1.40 |
1.78 |
1.64 |
2.34 |
2.83 |
10.67 |
|
Bond 4 |
250 |
0.25 |
0.06 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.06 |
|
Bond 5 |
300 |
0.30 |
0.00 |
0.88 |
0.00 |
0.00 |
1.83 |
0.00 |
0.00 |
0.00 |
2.71 |
|
Total Portfolio |
|
1.00 |
0.0265 |
0.325 |
0.4195 |
0.345 |
0.987 |
0.405 |
0.498 |
0.8865 |
3.8925 |
Since the 3-month rate did not change, and all other key rate durations for Bond 4 are zero, a 135 basis points change will have no effect on the value of the bond. Hence, Bond 4 remains valued at $250,000.00.
Q5. Suppose that there is a parallel upward shift in the yield curve. Which of the following best explains this phenomenon? The yield:
A) decrease is the same for all maturities.
B) increase is the same for all maturities.
C) increase is proportional to the original level for all maturities.
Correct answer is B)
A parallel upward shift indicates an equal yield increase across all maturities.
Q6. A yield curve is flat, and then it undergoes a non-parallel shift. After the shift, which of the following must be FALSE? The new yield curve is:
A) flat.
B) curvilinear.
C) a straight line.
Correct answer is A)
If a yield curve begins flat and then experiences a non-parallel shift, this means that some rates changed more than others. After the non-parallel shift the formerly flat yield curve can no longer be flat.
Q7. Which of the following is TRUE if there is a positive butterfly shift in the yield curve?
A) The curvature of the yield curve increases.
B) The yield curve becomes less humped at intermediate maturities.
C) The curvature of the yield curve decreases.
Correct answer is C)
A butterfly shift occurs when yields increase (decrease), the yields in the short maturity and long maturity sectors increase more (less) than the yields in the intermediate maturity sector.
Q8. Which of the following is TRUE if there is a twist in the yield curve?
A) The curvature of the yield curve increases.
B) The yield curve becomes humped at intermediate maturities.
C) The yield curve flattens or steepens.
Correct answer is C)
Twists refer to yield curve changes when the slope becomes either flatter or more steep. A flattening (steepening) of the yield curve means that the spread between short- and long-term rates has narrowed (widened).
Q9. With respect to yield curve, a negative butterfly shift means that the yield curve has become:
A) negatively sloped for all regions.
B) flat.
C) more curved.
Correct answer is C)
By definition, a negative butterfly shift means the curve has become more curved or “humped.” Such a shift could lead to an increase in slope in some regions and a decrease in slope in other regions.
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发表于 2009-3-16 18:02
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