3 MULTIPLE CHOICE QUESTIONS

1) A portfolio manager owns $5 million par value of bond ABC. The bond is trading at 70 per $100 par value and has a modified duration of 6. The portfolio manager is considering swapping out of bond ABC and into bond XYZ. The price of this bond is 85 per $100 par value and it has a modified duration of 3.5. What is the dollar duration of bond ABC per 100-basis-point change in yield?

A) $7 per $70 of market value

B) $.83333 per $70 of market value

C) $3 per $70 of market value

D) $4.2 per $70 of market value

2) From question 1: What is the dollar duration of bond XYZ per 100-basis-point change in yield?

A) $2.975 per $85 of market value

B) $8.5 per $85 of market value

C) $.1750 per $85 of market value

D)$4.75 per $85 of market value

3) What is the dollar duration for the $5 million par value position of bond ABC?

A) $300,000

B) $210,000

C) $3.5 million

D) $5 million