8) Calculate the modified duration of a 2 year bond amortizing bond with a face value of 200 that pays a 5% coupon semi-annually. The coupon is paid on the outstanding amount and subsequently 50 of the principal is paid to the bondholder each 6 months thereby reducing the outstanding amount. The discount factors are given in the table of question 7.

1. 1.93 years
2. 2.14 years
3. 2.00 years
4. 1.22 years

Q9 PV01 stands for:

1. Present value of a 1 year bond
2. Present value of a bond with a maturity below 1 year
3. Price value of a basis point
4. Price value of a basic point

Which of the following statements are true?

1. Duration is defined only for rises in interest rates.
2. Duration measures bond price changes best for small changes in interest rates.
3. Duration assumes that all interest rates move by the same number of basis points.
4. There is a single definition of duration.

1. 1 and 2.
2. 2 and 3.
3. 2 and 4
4. 2, 3 and 4.