1. The yield curve normally has an upward slope due to risk premiums, what is a downward sloping yield curve a strong indication of?
2. Why are long-term bond prices usually more sensitive to interest rate risk changes than prices of short-term bonds?
3. Briefly explain the difference between Macaulays duration and modified duration.
4. What is convexity and why is it generally considered a desirable trait?
5. What are the sources of potential profit and loss for an active bond manager?