1.An option-free bond has a market price and par value equal to $1,000. For small changes in the yield of this bond, its price will change one dollar for every basis point change in the yield. What is the duration of the bond?

A)   5.

B)   10.

C)   2.

D)   1.

2.Which of the following bonds has the shortest duration? A bond with a:

A)   20-year maturity, 6 percent coupon rate.

B)   10-year maturity, 6 percent coupon rate.

C)   10-year maturity, 10 percent coupon rate.

D)   20-year maturity, 10 percent coupon rate.

3.Assuming a flat term structure of interest rates of 5 percent, the duration of a zero-coupon bond with 5 years remaining to maturity is closest to:

A)   3.76.

B)   4.35.

C)   6.34.

D)   5.00.

4.What is the duration of a floating rate bond that has six years remaining to maturity and has semi-annual coupon payments. Assume a flat-term structure of 6 percent. Which of the following is closest to the correct duration?

A)   4.850.

B)   6.000.

C)   12.000.

D)   0.500.

5.Which of the following statements about duration is TRUE?

A)   The result of the formula for effective duration is for a 0.01% change in interest rates.

B)   A bond's percentage change in price and dollar change in price are both tied to the underlying price volatility.

C)   The formula for effective duration is: (price when yields fall - price when yields rise) / (initial price * change in yield expressed as a decimal).

D)   For a given change in interest rates, the greater the duration, the lower the price volatility.

答案和详解如下：

1.An option-free bond has a market price and par value equal to $1,000. For small changes in the yield of this bond, its price will change one dollar for every basis point change in the yield. What is the duration of the bond?

A)   5.

B)   10.

C)   2.

D)   1.

The correct answer was B)

A dollar change in price for this bond is a 0.01 percent change in its quoted price.

Duration = (100.1-(99.9))/(2*(100)*(0.0001))=10.

2.Which of the following bonds has the shortest duration? A bond with a:

A)   20-year maturity, 6 percent coupon rate.

B)   10-year maturity, 6 percent coupon rate.

C)   10-year maturity, 10 percent coupon rate.

D)   20-year maturity, 10 percent coupon rate.

The correct answer was C)

All else constant, a bond with a longer maturity will be more sensitive to changes in interest rates. All else constant, a bond with a lower coupon will have greater interest rate risk.

3.Assuming a flat term structure of interest rates of 5 percent, the duration of a zero-coupon bond with 5 years remaining to maturity is closest to:

A)   3.76.

B)   4.35.

C)   6.34.

D)   5.00.

The correct answer was D)

The duration of a zero coupon bond is approximately equal to its time to maturity.

4.What is the duration of a floating rate bond that has six years remaining to maturity and has semi-annual coupon payments. Assume a flat-term structure of 6 percent. Which of the following is closest to the correct duration?

A)   4.850.

B)   6.000.

C)   12.000.

D)   0.500.

The correct answer was D)

The duration of a floating rate bond is equal to the time until the next coupon payment takes place. As the coupon rate changes semi-annually with the level of the interest rate, a floating rate bond has the same duration as a pure discount bond with time to maturity equal to the time to the next coupon payment of the floating rate bond.

5.Which of the following statements about duration is TRUE?

A)   The result of the formula for effective duration is for a 0.01% change in interest rates.

B)   A bond's percentage change in price and dollar change in price are both tied to the underlying price volatility.

C)   The formula for effective duration is: (price when yields fall - price when yields rise) / (initial price * change in yield expressed as a decimal).

D)   For a given change in interest rates, the greater the duration, the lower the price volatility.

The correct answer was B)

The statement that a bond's percentage change in price and dollar change in price are both tied to the underlying price volatility is true.

The effective duration formula result is for a 1.00% change in interest rates (100 basis points equals 1.00%, or 0.01 in decimal form). The denominator is multiplied by 2. The greater the duration, the greater the price volatility. Remember that price volatility is directly related to maturity and inversely related to the coupon rate.