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 the options
E) None of the options
2. 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 the options
3. The duration of a par value bond with a coupon rate of 8% (paid annually) and a remaining time to maturity of 5 years is
A) 5 years. B) 5.4 years. C) 4.17 years. D) 4.31 years.
4. Par value bond XYZ has a modified duration of 6. Which one of the following statements regarding the bond is true?
A) If the market yield increases by 1%, the bond's price will decrease by $60.
B) If the market yield increases by 1%, the bond's price will increase by $50.
C) If the market yield increases by 1%, the bond's price will decrease by $50.
D) If the market yield increases by 1%, the bond's price will increase by $60.
5. Identify the bond that has the longest duration (no calculations necessary).
A) 20-year maturity with an 8% coupon
B) 20-year maturity with a 12% coupon
C) 20-year maturity with a 0% coupon
D) 10-year maturity with a 15% coupon
E) 12-year maturity with a 12% coupon