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I need some help with this! I would really appreciate any help! Thank you!! Answer the following questions. Please number your answers and put your
I need some help with this! I would really appreciate any help! Thank you!!
Answer the following questions. Please number your answers and put your name on each page. If you forget your name I will deduct 5 points. No late submissions! This project is due Tuesday December 12 th, 2014. Please place it in the week 15 dropbox. 1. Coupon reinvestment risk increases with a. Lower coupon/shorter reinvestment period b. Higher coupon/longer reinvestment period c. Coupon and reinvestment period have no impact 2. If interest rates rise the price of a bond will a. Rise b. Stay the same c. Decline 3. If interest rates rise, the value of reinvested coupons a. Rise b. Stay the same c. Decline 4. Bond capital gains are measured from a. Purchase price b. Carrying value c. Coupon rate d. Sale price 5. MacAulay duration measures a. Estimated linear change in price for a change in yield to maturity b. Estimated linear change in price for a change in benchmark yield c. Weighted average of time to receipt of coupon interest payments 6. Effective duration measures a. Estimated linear change in price for a change in yield to maturity b. Estimated linear change in price for a change in benchmark yield c. Weighted average of time to receipt of coupon interest payments 7. Modified duration measures a. Estimated linear change in price for a change in yield to maturity b. Estimated linear change in price for a change in benchmark yield c. Weighted average of time to receipt of coupon interest payments 8. The point where reinvested coupons offsets the drop in the price of a bond in a rising rate environment is also known as a. MacAulay duration b. Effective Duration c. Modified Duration Referring to the graph in the appendix answer questions 9-11 9. Line A represents a. Effective duration b. Modified duration c. MacAulay duration d. Convexity 10. 11. 12. 13. 14. 15. 16. 17. 18. e. Bond price Curve B represents a. Effective duration b. Modified duration c. MacAulay duration d. Convexity e. Bond price Area C represents a. Effective duration b. Modified duration c. MacAulay duration d. Convexity e. Bond price Coupon reinvestment risk dominates price risk when a. Investment horizon > MacAulay Duration b. Investment horizonStep by Step Solution
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