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LOS a: Distinguish between the full valuation approach (the scenario analysis approach) and the duration/convexity approach for measuring interest rate risk, and explain the advantage of using the full valuation approach.
Q1. Which of the following approaches in measuring interest rate risk is most accurate when properly performed?
A) Duration approach.
B) Duration/convexity approach.
C) Full Valuation approach.
Q2. Holding other factors constant, the interest rate risk of a coupon bond is higher when the bond's:
A) yield to maturity is lower.
B) current yield is higher.
C) coupon rate is higher.
Q3. Which of the following steps is NOT used in the full valuation approach in measuring interest rate risk?
A) Calculate the bond's convexity.
B) Compare resulting price changes.
C) Estimate hypothetical changes in required yields.
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发表于 2009-3-5 09:52
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