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24 22. Duration Calculations The duration of a perpetual preferred stock that pays an annual constant dividend and has a 12% yield is . a.

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22. Duration Calculations The duration of a perpetual preferred stock that pays an annual constant dividend and has a 12% yield is . a. 7 years b. 10 years c. 8 years d.) 9 years :(14r 1.12 9.3 -12 24. Duration and Predicted Bond PriceChanges Duration predicts that a 4% yield bond with a 6 year duration will change in price byif yields increase by 55 basis points. a. b. c. d. 3.17% -3.31% 3.31% -3.17% 25, Modified Duration An annual payment bond has a duration of 3 years and a yield rate of 4.5%. This bond has a modified duration of years. a. 2.94 3.00 c.) 2.87 d. 3.57 (14.045) 26. Interest Rate Risk Interest rate risk is composed of price risk and reinvestment risk. If interest rates If interest rates increase the investor's reinvestment increase the investor's bond sale price is nurstor picks a bond with durationthe investment horizon the two risks

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