Question 106
In contrast to the full valuation approach to measuring interest rate risk, the duration/convexity approach:
A) simplifies the process of estimating the value impact of changes in yield. B) provides a more accurate assessment of interest rate risk. C) accounts for the curvature of the price-yield relation. D) is used to evaluate the price effects of more complex interest rate scenarios. Question 107
To finance the purchase of a bond, dealers typically:
A) use margin transactions, borrowing money from intermediaries to purchase securities. B) sell a security with a commitment to buy it back at a later date. C) use margin and repurchase agreements equally. D) borrow from banks. Question 108
By purchasing a mortgage passthrough security, it is least likely that an investor:
A) can select a tranche that offers the desired prepayment risk characteristics. B) receives monthly cash flows. C) has a claim to a proportionate share of the interest and principal payments from a mortgage pool. D) will receive principal payments earlier than scheduled if mortgage interest rates decrease. Question 109
Which of the following statements about liquidity risk is least accurate?
A) Liquidity risk and the bid-ask spread are not relevant to an investor who is planning to hold a security to maturity. B) The bid-ask spread is an indication of the liquidity of a security. C) If trading activity in a security decreases, the bid-ask spread typically widens. D) A lack of liquidity may make it difficult to determine the value of a security. Question 110
A $1,000 par value, 10%, semiannual, 20-year debenture bond is currently selling for $1,100. What is this bond's current yield and will the current yield be higher or lower than the yield to maturity?
Current Yield Current Yield vs. YTM A) 8.9% higher B) 9.1% higher C) 9.1% lower D) 8.9% lower
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发表于 2008-5-26 12:24
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