9. What are the two offsetting types of interest rate risk? a. Capital gain risk and market price risk b. Coupon reinvestment risk and capital gain risk C. Coupon reinvestment risk and market price risk 10. Consider a three-year zero-coupon bond, the current price is $90 of $100 face value. The coupon payment is zero and the current YTM is 6.4%. What is its duration? a. 1.5 years b. 2.0 years C. 3.0 years 11. The interest rate risk of a bond with an embedded call option can be best measured by: a. Macaulay duration b. Effective duration c. Modified duration 12. Which of the following is most appropriate for measuring a bond's sensitivity to shaping (curve) risk of the yield curve: a. Key rate duration b. Effective duration C. Modified duration 13. Yield-to-maturity is always the realized return of holding a bond. a. True b. False 14. Which of the following most likely exhibits negative convexity? a. An option-free bond b. A putable bond C. A callable bond 15. The holding period (or investment horizon) for a bond at which the coupon reinvestment risk offsets market price risk can be best approximated by: a. Modified duration b. Macaulay duration c. Convexity 16. A bond has an annual modified duration of 7.020 and annual convexity of 65.180. If the bond's yield to maturity decrease by 25 basis points, the expected percentage price change is closest to: a. 1.73% b. 1.76% c. 1.78%