Question
23. An investor with a 10 year investment horizon current has $10,000 invested in bonds with a duration of 7.5. If he invests an additional
23. An investor with a 10 year investment horizon current has $10,000 invested in bonds with a duration of 7.5. If he invests an additional $10,000, which of the following bonds would best immunize his portfolio?
a) A bond with duration of 12.50
b) A bond with duration of 10.00
c) A bond with duration of 15.00
24. Yield spreads are often calculated as the difference between the interest rate on a risky bond and the interest rate on:
a) Government Bonds
b) Commercial Paper
c) Bankers Acceptances
d) none of the above.
25. Effective duration is commonly used for:
a) Government Bonds
b) Bonds with embedded options
c) Equity Assets
d) none of the above.
26. The price of a 15 year, coupon bond, is expected to decline by 5% if interest rates go from 8% to 8.5%. For the same bond, if interest rate were to move from 8.5% to 9% the decline in the price would be:
a) 5%
b) Less than 5%
c) More than 5%
d) none of the above.
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