1. Suppose management is unwilling to permit losses exceeding 18% of a financial institutions capital to a particular sector? What is the concentration limit if management estimates that the amount lost per dollar of defaulted loans in this sector is 30 cents? What would the concentration limit be if the loss rate on bad loans was 55 cents? What if it was 12 cents?

2. Suppose management is unwilling to permit losses exceeding 22% of a financial institutions capital to a particular sector? What is the concentration limit if management estimates that the amount lost per dollar of defaulted loans in this sector is 45 cents? What are the permitted losses that could not exceed 25%? What if it was 16%?

3. A six-year Eurobond has a 6% coupon and a 6% yield. What is the modified duration if the duration equals 5.20 years? What is the dollar duration for this bond if its par value is $1,000?

4. Determine the duration of a Eurobond with that matures in five years, has an annual coupon of 6%, and a face value of $1,000. What would the duration be if the annual coupon is 6% and the current yield is 10%?