Test Bank For Investments and Portfolio Management Zvi Bodie Alex Kane Alan Marcus 9th Edition

Test Bank For Investments and Portfolio Management Zvi Bodie Alex Kane Alan Marcus 9th Edition

Chapter 16

Managing Bond Portfolios

Multiple Choice Questions
1. The duration of a bond is a function of the bond’s
A. coupon rate.
B. yield to maturity.
C. time to maturity.
D. All of these are correct.
E. None of these is correct.

2. Ceteris paribus, the duration of a bond is positively correlated with the bond’s
A. time to maturity.
B. coupon rate.
C. yield to maturity.
D. All of these are correct.
E. None of these is correct.

3. Ceteris paribus, the duration of a bond is negatively correlated with the bond’s
A. time to maturity.
B. coupon rate.
C. yield to maturity.
D. coupon rate and yield to maturity.
E. None of these is correct.

4. Holding other factors constant, the interest-rate risk of a coupon bond is higher when the bond’s:
A. term-to-maturity is lower.
B. coupon rate is higher.
C. yield to maturity is lower.
D. current yield is higher.
E. None of these is correct.

5. Holding other factors constant, the interest-rate risk of a coupon bond is higher when the bond’s:
A. term-to-maturity is higher.
B. coupon rate is higher.
C. yield to maturity is higher.
D. All of these are correct.
E. None of these is correct.

6. Holding other factors constant, the interest-rate risk of a coupon bond is higher when the bond’s:
A. term-to-maturity is lower.
B. coupon rate is lower.
C. yield to maturity is higher.
D. term-to-maturity is lower and yield to maturity is higher.
E. None of these is correct.

7. Holding other factors constant, the interest-rate risk of a coupon bond is lower when the bond’s:
A. term-to-maturity is lower.
B. coupon rate is higher.
C. yield to maturity is lower.
D. term-to-maturity is lower and coupon rate is higher.
E. All of these are correct.

8. Holding other factors constant, the interest-rate risk of a coupon bond is lower when the bond’s:
A. term-to-maturity is lower.
B. coupon rate is higher.
C. yield to maturity is higher.
D. term-to-maturity is lower and coupon rate is higher.
E. All of these are correct.

9. Holding other factors constant, the interest-rate risk of a coupon bond is lower when the bond’s:
A. term-to-maturity is higher.
B. coupon rate is lower.
C. yield to maturity is higher.
D. term-to-maturity is higher and coupon rate is lower.
E. All of these are correct.

10. The “modified duration” used by practitioners is equal to the Macaulay duration
A. times the change in interest rate.
B. times (one plus the bond’s yield to maturity).
C. divided by (one minus the bond’s yield to maturity).
D. divided by (one plus the bond’s yield to maturity).
E. None of these is correct.