Question
For questions 31 and 32 use the following information You hold a portfolio of two bonds. Both bonds have Par Value of $1,000 and a
For questions 31 and 32 use the following information You hold a portfolio of two bonds. Both bonds have Par Value of $1,000 and a Yield to Maturity of 5%. Bond A is a zero-coupon bond with a maturity of 3 years. Bond B pays a 5% coupon annually and has a maturity of 3 years.
31. What is the duration of your bond portfolio?
A) 2 years
B) 2.5 years
C) 2.86 years
D) 2.92 years
E) 3 years
32. Suppose the Yield to Maturity on each bond suddenly rises to 7%. Bond As price will _______ than Bond Bs price.
A) Increase by a greater percentage
B) Increase by a smaller percentage
C) Decrease by a greater percentage
D) Decrease by a smaller percentage
E) The price of both bonds will stay at $1,000
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