6. A three-year risk-free 8% coupon bond (coupons paid annually) is trading at par. One- and two-year spot rates are 6.5 percent and 7.0 percent, respectively. The three-year spot rate is closest to ________.

A. 8.1%

B. 9.2%

C. 9.0%

D. 10.1%

7. An analyst gathers the following information: (assuming annual compounding)

Years to Maturity Spot Rates

1 5.00%

2 6.00%

3 6.50%

Based on the data above, the one-year implied forward rate two years from now (F2,3) is closest to _________.

A. 6.25%

B. 7.26%

C. 7.51%

D. 7.01%

8. Which of the following statements about duration characteristics are true?

I. The duration of an inverse floater can be higher than its term to maturity.

II. There is generally an inverse relationship between coupon rate and duration.

III. Duration of a 5-year floating rate note (with quarterly coupon payments) is very close to five years.

IV. Using duration approximation to calculate bond price changes is most accurate when the yield change is large.

A. II and IV only.

B. I and IV only.

C. I and II only.

D. II and III only.

9. A portfolio manager has a bond position worth USD 698,000. The position has a modified duration of 8 years and a convexity of 150 year2. Using duration and convexity approximation, how much does the value of the position change if interest rates increase by 76 basis points?

(Round your answer to the whole dollar, and include the sign of the change. That is, if the value of the position goes down, include a negative sign in your answer.)

10. A 7-year zero-coupon bond carries a yield to maturity of 6%. Assuming semi-annual compounding and $1,000 par value, the price of this bond is $_________.

(Round to the nearest cent. For example, 654.32)