An 8% coupon bond makes annual coupon payment and it has three years until maturity and a yield to maturity of 8%. What is the duration of this bond? A) 2.00

B) 2.78 C) 2.85 D) 3.00

Xerox just issued two bonds. The 1^st Bond is a zero coupon bond with 30 year to maturity. The 2^nd Bond is a 10% coupon bond with 10 year to maturity. Assume that other characteristics of these two bonds are the same (e.g., the same YTM). You expect that the Fed will announce a decrease of benchmark interest rate. Which bond do you want to purchase in order to earn higher return around the incoming interest rate change?

A) The 1^st bond issued by Xerox

B) The 2^nd bond issued by Xerox

Are the following statements true or false?

(i) If a zero-coupon bonds time to maturity is 6 year, then this zero-coupon bonds duration is equal to 6 years.

(ii) If a perpetuity bonds YTM is equal to 20%, then this perpetuity bonds duration is equal to 6 years.

(i) (ii)

A) True False

B) True True C) False True D) False False