1.Given a bond with a modified duration of 1.93, if required yields increase by 50 basis points, the expected percentage price change would be:

A)   -0.965%.

B)   1.000%.

C)   1.025%.

D)   -1.025%.

2.Par value bond XYZ has a modified duration of 5. Which of the following statements regarding the bond is TRUE? If the market yield:

A)   increases by 1% the bond's price will decrease by $50.

B)   increases by 1% the bond's price will decrease by $60.

C)   increases by 1% the bond's price will increase by $50.

D)   decreases by 1% the bond's price will decrease by $45.

3.A bond has the following characteristics:

§       Modified duration of 18 years

§       Maturity of 30 years

§       Effective duration of 16.9 years

§       Current yield to maturity is 6.5 percent

If the market interest rate decrease by 0.75 percent, what will be the percentage change in the bond's price?

A)   0.750%.

B)   +0.750%.

C)   -12.675%.

D)   +12.675%.

4.A bond with a semi-annually coupon rate of 3 percent sells for $850. It has a modified duration of 10 and is priced at a yield to maturity (YTM) of 8.5 percent. If the YTM increases to 9.5 percent, the predicted change in price, using the duration concept decreases by:

A)   $77.56.

B)   $79.92.

C)   $82.50.

D)   $85.00.

5.The price of a bond is equal to $101.76 if the term structure of interest rates is flat at 5 percent. The following bond prices are given for up and down shifts of the term structure of interest rates. Using the following information what is the approximate percentage price change of the bond using effective duration and assuming interest rates decrease by 0.5 percent?

Bond price: $98.46 if term structure of interest rates is flat at 6 percent
Bond price: $105.56 if term structure of interest rates is flat at 4 percent

A)   0.0087%.

B)   1.74%.

C)   0.174%.

D)   0.87%.