投資學(xué)第7版testbank答案16

1、Multiple Choice Questions1. The duration of a bond is a function of the bond'sA) coupon rate.B) yield to maturity.C) time to maturity.D) all of the above.E) none of the above.Answer: D Difficulty: EasyRationale: Duration is calculated by discounting the bond's cash flows at the bond's yi

2、eld to maturity and, except for zero-coupon bonds, is always less than time to maturity.2. Ceteris paribus, the duration of a bond is positively correlated with the bond'sA) time to maturity.B) coupon rate.C) yield to maturity.D) all of the above.E) none of the above.Answer: A Difficulty: Modera

3、teRationale: Duration is negatively correlated with coupon rate and yield to maturity.3. Holding other factors constant, the interest-rate risk of a coupon bondis higher when the bond's:A) term-to-maturity is lower.B) coupon rate is higher.C) yield to maturity is lower.D) current yield is higher

4、.E) none of the above.Answer: C Difficulty: ModerateRationale: The longer the maturity, the greater the interest-rate risk.The lower the coupon rate, the greater the interest-rate risk. The lowerthe yield to maturity, the greater the interest-rate risk. These conceptsare reflected in the duration ru

5、les; duration is a measure of bond pricesensitivity to interest rate changes (interest-rate risk).4. The "modified duration" used by practitioners is equal to the Macaulay durationA) times the change in interest rate.B) times (one plus the bond's yield to maturity).C) divided by (one m

6、inus the bond's yield to maturity).D) divided by (one plus the bond's yield to maturity).E) none of the above.Answer: D Difficulty: ModerateRationale: D* = D/(1 + y)5. Given the time to maturity, the duration of a zero-coupon bond is higher when the discount rate isA) higher.B) lower.C) equa

7、l to the risk free rate.D) The bond's duration is independent of the discount rate.E) none of the above.Answer: D Difficulty: ModerateRationale: The duration of a zero-coupon bond is equal to the maturity of the bond.6. The interest-rate risk of a bond isA) the risk related to the possibility of

8、 bankruptcy of the bond's issuer.B) the risk that arisesfrom the uncertainty of the bond's return caused by changes in interest rates.C) the unsystematic risk caused by factors unique in the bond.D) A and B above.E) A, B, and C above.Answer: B Difficulty: ModerateRationale: Changing interest

9、 rates change the bond's return, both in terms of the price of the bond and the reinvestment of coupon payments.7. Which of the following two bonds is more price sensitive to changes in interest rates1) A par value bond, X, with a 5-year-to-maturity and a 10% coupon rate.2) A zero-coupon bond, Y

10、, with a 5-year-to-maturity and a 10% yield-to-maturity.A) Bond X because of the higher yield to maturity.B) Bond X because of the longer time to maturity.C) Bond Y because of the longer duration.D) Both have the same sensitivity because both have the same yield to maturity.E) None of the aboveAnswe

11、r: C Difficulty: ModerateRationale: Duration is the best measure of bond price sensitivity; the longer the duration the higher the price sensitivity.8. Holding other factors constant, which one of the following bonds has the smallest price volatilityA) 5-year, 0% coupon bondB) 5-year, 12% coupon bon

12、dC) 5 year, 14% coupon bondD) 5-year, 10% coupon bondE) Cannot tell from the information given.Answer: C Difficulty: Moderatelower when the couponRationale: Duration (and thus price volatility) is rates are higher.9. Which of the following is not trueA) Holding other things constant, the duration of

13、 a bond increases with time to maturity.B) Given time to maturity, the duration of a zero-coupon decreases with yield to maturity.C) Given time to maturity and yield to maturity, the duration of a bondis higher when the coupon rate is lower.D) Duration is a better measure of price sensitivity to int

14、erest rate changes than is time to maturity.E) All of the above.Answer: B Difficulty: ModerateRationale: The duration of a zero-coupon bond is equal to time to maturity, and is independent of yield to maturity.10. The duration of a 5-year zero-coupon bond isA) smaller than 5.B) larger than 5.C) equa

15、l to 5.D) equal to that of a 5-year 10% coupon bond.E) none of the above.Answer: C Difficulty: EasyRationale: Duration of a zero-coupon bond equals the bond's maturity.11. The basic purpose of immunization is toA) eliminate default risk.B) produce a zero net interest-rate risk.C) offset price an

16、d reinvestment risk.D) A and B.E) B and C.Answer: E Difficulty: ModerateRationale: Whena portfolio is immunized, price risk and reinvestment risk exactly offset each other resulting in zero net interest-rate risk.12. The duration of a par value bond with a coupon rate of 8% and a remainingtime to ma

17、turity of 5 years isA) 5 years.B) years.C) years.D) years.E) none of the above.Answer: D Difficulty: ModerateRationale:Calculations are shown below.Yr.CFPV of CF08%Weight * Yr.1$80$80/ = $* 1 =2$80$80/ 2 = $* 2 =3$80$80/ 3 = $* 3 =4$80$80/ 4 = $* 4 =5$1,080$1,080/ 5 = $* 5 =Sum$yrs. (duration)13. Th

18、e duration of a perpetuity with a yield of 8% isA) years.B) years.C) years.D) cannot be determined.E) none of the above.Answer: A Difficulty: EasyRationale: D = = years.duration14. A seven-year par value bond has a coupon rate of 9%and a modified ofA) 7 years.B) years.C) years.D) years.E) none of th

19、e above.Answer: C Difficulty: DifficultRationale:Calculations are shown below.Yr.CFPV of CF9%Weight * Yr.1$90$X1 =2$90$X2 =3$90$X3 =4$90$X4 =5$90$X5 =6$90$X6 =7$1,090$X7 =Sum$years (duration)modified duration = years/ = years.15. Par value bond XYZhas a modified duration of 6. Which one of the follo

20、wing statements regarding the bond is trueA) If the market yield increases by 1% the bond's price will decrease by $60.B) If the market yield increases by 1% the bond's price will increase by $50.C) If the market yield increases by 1% the bond's price will decrease by $50.D) If the marke

21、t yield increases by 1% the bond's price will increase by $60.E) None of the above.Answer: A Difficulty: ModerateRationale: = -D*-$60 = -6 X $1,00016. Which of the following bonds has the longest durationA) An 8-year maturity, 0% coupon bond.B) An 8-year maturity, 5% coupon bond.C) A 10-year mat

22、urity, 5% coupon bond.D) A 10-year maturity, 0% coupon bond.E) Cannot tell from the information given.Answer: D Difficulty: ModerateRationale: The longer the maturity and the lower the coupon, the greater the duration17. Which one of the following par value 12%coupon bonds experiences a price change

23、 of $23 when the market yield changes by 50 basis pointsA) The bond with a duration of 6 years.B) The bond with a duration of 5 years.C) The bond with a duration of years.D) The bond with a duration of years.E) None of the above.Answer: D Difficulty: DifficultRationale: DP/P = -D X D(1+y) / (1+y); =

24、 -D X .005 / ; D = .18. Which one of the following statements is true concerning the duration ofa perpetuityA) The duration of 15%yield perpetuity that pays $100 annually is longer than that of a 15% yield perpetuity that pays $200 annually.B) The duration of a 15% yield perpetuity that pays $100 an

25、nually isshorter than that of a 15% yield perpetuity that pays $200 annually.C) The duration of a 15%yield perpetuity that pays $100 annually is equal to that of 15% yield perpetuity that pays $200 annually.D) the duration of a perpetuity cannot be calculated.E) None of the above.Answer: C Difficult

26、y: EasyRationale: Duration of a perpetuity = (1 + y)/y; thus, the duration ofa perpetuity is determined by the yield and is independent of the cashflow.19. The two components of interest-rate risk areA) price risk and default risk.B) reinvestment risk and systematic risk.C) call risk and price risk.

27、D) price risk and reinvestment risk.E) none of the above.Answer: D Difficulty: EasyRationale: Default, systematic, and call risks are not part of interest-rate risk. Only price and reinvestment risks are part of interest-rate risk.20. The duration of a coupon bondA) does not change after the bond is

28、 issued.B) can accurately predict the price change of the bond for any interest rate change.C) will decrease as the yield to maturity decreases.D) all of the above are true.E) none of the above is true.Answer: E Difficulty: EasyRationale: Duration changes as interest rates and time to maturity chang

29、e, can only predict price changes accurately for small interest rate changes, and increases as the yield to maturity decreases.21. Indexing of bond portfolios is difficult becauseA) the number of bonds included in the major indexes is so large that it would be difficult to purchase them in the prope

30、r proportions.B) many bonds are thinly traded so it is difficult to purchase them ata fair market price.C) the composition of bond indexes is constantly changing.D) all of the above are true.E) both A and B are true.Answer: D Difficulty: ModerateRationale: All of the above are true statements about

31、bond indexes.22. You have an obligation to pay $1,488 in four years and 2 months. In which bond would you invest your $1,000 to accumulate this amount, with relative certainty, even if the yield on the bond declines to % immediately after you purchase the bondA) a 6-year; 10% coupon par value bondB)

32、 a 5-year; 10% coupon par value bondC) a 5-year; zero-coupon bondD) a 4-year; 10% coupon par value bondE) none of the aboveAnswer: B Difficulty: DifficultRationale: When duration = horizon date, one is immunized, or protected, against one interest rate change. The zero has D = 5. Since the other bon

33、ds have the same coupon and yield, solve for the closest value of Tthat gives D = years. = )/.10 - + T(. / = ; .68 T - .68 + .68 = ; .68T = ; T = ; T ln = ln ; T = years, so choose the 5-year 10% coupon bond.23. Duration measuresA) weighted average time until a bond's half-life.B) weighted avera

34、ge time until cash flow payment.C) the time required to recoup one's investment, assuming the bond was purchased for $1,000.D) A and C.E) B and C.Answer: E Difficulty: ModerateRationale: B and C are true, as one receives coupon payments throughout the life of the bond (for coupon bonds); thus, d

35、uration is less than time to maturity (except for zeros).24. DurationA) assesses the time element of bonds in terms of both coupon and term to maturity.B) allows structuring a portfolio to avoid interest-rate risk.C) is a direct comparison between bond issues with different levels of risk.D) A and B

36、.E) A and C.Answer: D Difficulty: ModerateRationale: Duration is a weighted average of when the cash flows of a bond are received; thus both coupon and time to maturity are considered. If the duration of the portfolio equals the investor's horizon date, the investor is protected against interest

37、 rate changes.25. Identify the bond that has the longest duration (no calculations necessary).A) 20-year maturity with an 8% coupon.B) 20-year maturity with a 12% coupon.C) 15-year maturity with a 0% coupon.D) 10-year maturity with a 15% coupon.E) 12-year maturity with a 12% coupon.Answer: C Difficu

38、lty: ModerateRationale: The lower the coupon, the longer the duration. The zero-coupon bond is the ultimate low coupon bond, and thus would have the longest duration.26. When interest rates decline, the duration of a 10-year bond selling at a premiumA) increases.B) decreases.C) remains the same.D) i

39、ncreases at first, then declines.E) decreases at first, then increases.Answer: A Difficulty: ModerateRationale: The relationship between interest rates and duration is an inverse one.27. An 8%, 30-year corporate bond was recently being priced to yield 10%. TheMacaulay duration for the bond is years.

40、 Given this information, the bond's modified duration would be.A)B)C)D)E) none of the aboveAnswer: C Difficulty: EasyRationale: D* = D/(1 + y); D* = =28. An 8%, 15-year bond has a yield to maturity of 10%and duration of years.If the market yield changes by 25 basis points, how muchchange will th

41、ere be in the bond's priceA) %B) %C) %D) %E) none of the aboveAnswer: A Difficulty: ModerateRationale: A P/P = X / = %29. One way that banks can reduce the duration of their asset portfolios is through the use ofA) fixed rate mortgages.B) adjustable rate mortgages.C) certificates of deposit.D) s

42、hort-term borrowing.E) none of the above.Answer: B Difficulty: EasyRationale: One of the gap managementstrategies practiced by banks is the issuance of adjustable rate mortgages, which reduce the interest rate sensitivity of their asset portfolios.30. The duration of a bond normally increases with a

43、n increase inA) term to maturity.B) yield to maturity.C) coupon rate.D) all of the above.E) none of the above.Answer: A Difficulty: ModerateRationale: The relationship between duration and term to maturity is a direct one; the relationship between duration and yield to maturity and to coupon rate is

44、 negative.31. Which one of the following is an incorrect statement concerning durationA) The higher the yield to maturity, the greater the durationB) The higher the coupon, the shorter the duration.C) The difference in duration is small between two bonds with different coupons each maturing in more

45、than 15 years.D) The duration is the same as term to maturity only in the case of zero-coupon bonds.E) All of the statements are correct.Answer: A Difficulty: ModerateRationale: The relationship between duration and yield to maturity is an inverse one; as is the relationship between duration and cou

46、pon rate. The difference in the durations of longer-term bonds of varying coupons (high coupon vs. zero) is considerable. Duration equals term to maturity only with zeros.32. Immunization is not a strictly passive strategy becauseA) it requires choosing an asset portfolio that matches an index.B) th

47、ere is likely to be a gap between the values of assets and liabilities in most portfolios.C) it requires frequent rebalancing as maturities and interest rates change.D) durations of assets and liabilities fall at the same rate.E) none of the above.Answer: C Difficulty: ModerateRationale: As time pas

48、ses the durations of assets and liabilities fallat different rates, requiring portfolio rebalancing. Further, every change in interest rates creates changes in the durations of portfolio assets and liabilities.33. Contingent immunizationA) is a mixed-active passive bond portfolio management strategy

49、.B) is a strategy whereby the portfolio may or may not be immunized.C) is a strategy whereby if and when some trigger point value of the portfolio is reached, the portfolio is immunized to insure an minimum required return.D) A and B.E) A, B, and C.Answer: E Difficulty: EasyRationale: Contingent imm

50、unization insures a minimum average rate of return over time by immunizing the portfolio if and when the value of the portfolio reaches the trigger point required to insure that rate of return.Thus, the strategy is a combination active/passive strategy; but the portfolio will be immunized only if ne

51、cessary.34. Some of the problems with immunization areA) duration assumes that the yield curve is flat.B) durationassumes that if shifts in the yield curve occur, these shiftsare parallel.C) immunization is valid for one interest rate change only.D) durations and horizon dates change by the sameamou

52、nts with the passage of time.E) A, B, and C.Answer: E Difficulty: ModerateRationale: Durations and horizon dates change with the passage of time, but not by the same amounts.35. If a bond portfolio manager believesA) in market efficiency, he or she is likely to be a passive portfolio manager.B) that

53、 he or she can accurately predict interest rate changes, he or she is likely to be an active portfolio manager.C) that he or she can identify bond market anomalies, he or she is likely to be a passive portfolio manager.D) A and B.E) A, B, and C.Answer: D Difficulty: ModerateRationale: If one believe

54、s that one can predict bond market anomalies, one is likely to be an active portfolio manager.36. According to experts, most pension funds are underfunded becauseA) their liabilities are of shorter duration than their assets.B) their assets are of shorter duration than their liabilities.C) they cont

55、inually adjust the duration of their liabilities.D) they continually adjust the duration of their assets.E) they are too heavily invested in stocks.Answer: B Difficulty: Moderate37. Cash flow matching on a multiperiod basis is referred to as aA) immunization.B) contingent immunization.C) dedication.

56、D) duration matching.E) rebalancing.Answer: C Difficulty: EasyRationale: Cash flow matching on a multiperiod basis is referred to as a dedication strategy.38. Immunization through duration matching of assets and liabilities may beineffective or inappropriate becauseA) conventional duration strategie

57、s assume a flat yield curve.B) duration matching can only immunize portfolios from parallel shifts in the yield curve.C) immunization only protects the nominal value of terminal liabilities and does not allow for inflation adjustment.D) both A and C are true.E) all of the above are true.Answer: E Difficulty: EasyRationale: All of the above are correct statements about the limitations of immunization through duration matching.39. The curvature of the price-yield curve for a given b