Question
1) Which of the following is one of Malkiel's theorems? The lower the coupon rate on a bond, the more sensitive is its price to
1) Which of the following is one of Malkiel's theorems?
The lower the coupon rate on a bond, the more sensitive is its price to a change in interest rates
Bond prices move in the same direction with interest rates
For a given bond, the volatility of a bond is symmetrical, i.e., a decrease in interest rates raises bond prices by the same amount as a corresponding increase in interest rates lowers prices
The price sensitivity of any bond increases with its maturity, but the increase occurs at a increasing rate
2 ) Consider Bond XYZ, a 4% coupon 5-year bond with semi-annual payments. Which of the following is true?
Bond LMN, a 6% coupon 5-year bond with semi-annual payments will have a larger Macaulay Duration than Bond XYZ
Macaulay Duration for Bond XYZ will be less than 5
If interest rates increase then the Bond XYZ price will increase
Bond ABC, a 4% coupon 10-year bond with annual payments will have a smaller Macaulay Duration than Bond XYZ
3) Consider the financing of a $15,000 car with monthly payments for 3 years and an APR of 9%. What is the monthly payment?
$477.00
$454.06
$417.03
$416.67
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