1. federal notes and bond are quoted on a price basis in points with one point showing 1% of the par value. These points are split in 32nd and can have a + sign. Thus, a quote of 88 – 17 + for a $10,000 face value bond shows a price of:
a. $8,833
b. $8,856.25
c. $8,816
d. $8,854.68
2. one of the problems of using the current yield as a return measure is:
a. it double counts the capital gains
b. time value of money is ignored in calculation
c. the capital loss is over emphasized
d. all of the above are true
3. for a given yield and modified duration, the lower the coupon the:
a. smaller the convexity
b. larger the convexity
c. lower the Macaulary duration
d. none of these are true
4. the YTM has a distinct impact on the bond value. Bond value:
a. goes up when YTM goes up
b. goes down when YTM goes up
c. goes down when YTM goes down
d. only a and c are true