Portfolio A consists of a one-year zero-coupon bond with a face value of $2,500 and a 10-year zero-coupon bond with a face value of $6,500. Portfolio B consists of a 5.95-year zero-coupon bond with a face value of $5,000. The current yield on all bonds is 10% per annum (continuously compounded).

1.The duration of Portfolio A is equal to-------------

2.The percentage change for a 0.5% per annum increase in yield for Portfolio A will (increase/decrease)---------------the value

3 .The percentage change for a 0.5% per annum increase in yield for Portfolio A will change the value by-----------

4 The percentage change for a 3.5% per annum increase in yield for Portfolio B will (increase/decrease) ------------- the value

5. The percentage change for a 3.5% per annum increase in yield for Portfolio B will change the value by--------------

6. The volatility estimate using the EWMA model with = 0.94 is----------------%

7. The volatility of an asset is 2% per day. What is the standard deviation of the percentage price change in four days. Percentage change in price is ------------------

8. If you know the correlation between two variables, what extra information do you need to calculate the covariance?

A. Standard deviation on two variables

B. Standard deviation on only one of the variables

C. Correlation between two variables

D. Covariance between the asset and the market