9. The duration of a 5-year zero-coupon bond is

A. smaller than 5.

B. larger than 5.

C. equal to 5.

D. equal to that of a 5-year 10% coupon bond.

E. none of the above

10. Which of the following are true about the interest-rate sensitivity of bonds? I) Bond prices and yields are inversely related. II) Prices of long-term bonds tend to be more sensitive to interest rate changes than prices of short-term bonds. III) Interest-rate risk is directly related to the bond's coupon rate. IV) The sensitivity of a bond's price to a change in its yield to maturity is inversely related to the yield to maturity at which the bond is currently selling.

A. I and II

B. I and III

C. I, II, and IV

D. II, III, and IV

11. Par value bond GE has a modified duration of 11. Which one of the following statements regarding the bond is true?

A. If the market yield increases by 1% the bond's price will decrease by $55.

B. If the market yield increases by 1% the bond's price will increase by $55.

C. If the market yield increases by 1% the bond's price will decrease by $110.

D. If the market yield increases by 1% the bond's price will increase by $110.

12. The current yield on a bond is equal to ________.

A) annual interest divided by the current market price

B) the yield to maturity

C) annual interest divided by the par value

D) the internal rate of return