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Q3. What is the effective duration for Bond 2? ffice ffice" />
A) 1.620.
B) 0.023.
C) 1.470.
Correct answer is A)
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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 |
The effective duration for any individual issue is the sum of the individual key rate durations for that issue. For Bond 2, the effective duration is:
0.02 + 0.13 + 1.47 = 1.62
Q4. What is the 20-year rate duration for Bond 3?
A) 1.61.
B) 1.64.
C) 3.23.
Correct answer is B)
The 20-year rate duration for Bond 3 can be taken directly from the table (= 1.64).
Q5. An analyst has a list of key rate durations for a portfolio of bonds. If only one interest rate on the yield curve changes, the effect on the value of the bond portfolio will be the change of that rate multiplied by the:
A) median of the key rate durations.
B) weighted average of the key rate durations.
C) key rate duration associated with the maturity of the rate that changed.
Correct answer is C)
This is how an analyst uses key rate durations: For a given change in the yield curve, each rate change is multiplied by the associated key rate duration. The sum of those products gives the change in the value of the portfolio. If only the five-year interest rate changes, for example, then the effect on the portfolio will be the product of that change times the five-year key rate duration.
Q6. Which of the following best describes key rate duration? Key rate duration is determined by:
A) changing the yield of a specific maturity.
B) changing the curvature of the entire yield curve.
C) shifting the whole yield curve in a parallel manner.
Correct answer is A)
Key rate duration can be defined as the approximate percentage change in the value of a bond or bond portfolio in response to a 100 basis point change in a key rate, holding all other rates constant, where every security or portfolio has a set of key rate durations, one for each key rate maturity point.
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发表于 2009-3-18 16:50
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