6.For coupon-paying bonds, duration and years to maturity:

A)   are equal.

B)   are unequal with duration exceeding years to maturity.

C)   may be equal depending on the coupon rate.

D)   are unequal with duration less than years to maturity.

7.All else held equal, the duration of bonds selling at higher yields compared to bonds selling at lower yields will be:

A)   greater.

B)   lower.

C)   equal.

D)   cannot be determined with the information given.

8.In December 2004, an investor purchases a zero-coupon bond issued in 1998 and maturing in December 2008. What is the bond's approximate duration?

A)   10 years.

B)   6 years.

C)   Cannot be determined.

D)   4 years.

9.Which of the following statements concerning bond duration is FALSE? Duration:

A)   is the weighted-average maturity of the cash flows of the bond.

B)   measures the price sensitivity of the bond to an interest rate change.

C)   decreases as the coupon increases.

D)   increases as market yields rise.

10.With an option-free zero-coupon bond the effective duration is:

A)   approximately equal to the number of semiannual periods to maturity.

B)   significantly greater than its modified duration.

C)   unrelated to its time to maturity.

D)   approximately equal to its years to maturity.

答案和详解如下：

6.For coupon-paying bonds, duration and years to maturity:

A)   are equal.

B)   are unequal with duration exceeding years to maturity.

C)   may be equal depending on the coupon rate.

D)   are unequal with duration less than years to maturity.

The correct answer was D)

For coupon paying bonds, duration is less than maturity.

Duration is approximately equal to the point in years where the investor receives half of the present value of the bond's cash flows. Since zero-coupon bonds only have one cash flow at maturity, the duration is approximately equal to maturity. Any coupon amount will shorten duration because some cash flow is received prior to maturity.

7.All else held equal, the duration of bonds selling at higher yields compared to bonds selling at lower yields will be:

A)   greater.

B)   lower.

C)   equal.

D)   cannot be determined with the information given.

The correct answer was B)

Duration is inversely related to yield to maturity (YTM). The higher the YTM, the lower the duration. This is because the change in the bond's price (or present value) is inversely related to changes in interest rates. When market yields rise, the value (or cash flow) of a bond decreases without decreasing the time to maturity.

Duration is also a function of volatility (risk).  Higher volatility (risk) = higher duration.  A higher coupon bond has a lower duration relative to a similar bond with a lower coupon because the bond holder is getting more of their cash value sooner (because of the higher coupon).  This lowers the overall risk of the bond resulting in a lower duration.

8.In December 2004, an investor purchases a zero-coupon bond issued in 1998 and maturing in December 2008. What is the bond's approximate duration?

A)   10 years.

B)   6 years.

C)   Cannot be determined.

D)   4 years.

The correct answer was D)

For a zero-coupon bond duration is approximately equal to the number of years to maturity. Here, there are 4 years until maturity, so the effective duration is approximately equal to 4 years. We use the term approximately because this ignores the curvature of the price/yield curve.

9.Which of the following statements concerning bond duration is FALSE? Duration:

A)   is the weighted-average maturity of the cash flows of the bond.

B)   measures the price sensitivity of the bond to an interest rate change.

C)   decreases as the coupon increases.

D)   increases as market yields rise.

The correct answer was D)

Duration decreases as market yields rise.

10.With an option-free zero-coupon bond the effective duration is:

A)   approximately equal to the number of semiannual periods to maturity.

B)   significantly greater than its modified duration.

C)   unrelated to its time to maturity.

D)   approximately equal to its years to maturity.

The correct answer was D)

For an option-free zero coupon bond, effective and modified duration will be almost identical and both will be approximately equal to the bond's years to maturity.