QUESTION 1
The nominal rate of interest is generally greater than the real rate of interest.
(Nominal interest rates will exceed real rates when the inflation rate is a positive number (as it usually is)GOOGLE)
True
False
QUESTION 2
A decrease in the corporate tax rate should increase the real rate of interest.
True
False
QUESTION 3
When government bond yields increase, we would expect the price of corporate bonds to increase.
True
False
QUESTION 4
The greater a bond's maturity, the higher is its price volatility.
True
False
QUESTION 5
If interest rates fall by 1%, a 10-year, 3% coupon bond will increase in price less than an otherwise equivalent zero-coupon bond.
True
False
QUESTION 6
Bond investors prefer bonds with positive rather than negative convexity.
True
False
QUESTION 7
Suppose that the 5-year treasury yield is 2.0%; the 5-years TIPS yield is .3%. What is the estimated 5-year inflation rate?
0.3%
1.2%
1.7%
2%
2.2%
QUESTION 8
Suppose the spot US$ to Euro rate S = 1.10; the 6-month borrowing rate in Euros = REuro= .01; the 6-month future exchange rate US$ to Euros F =1.13. What US$ 6-month interest rate (RUS) would preserve interest rate parity?
0.01
0.032
0.065
None of the Above
QUESTION 9
At issuance, bond coupon rates are usually set to be ______________ the market yield on similar bonds.
below
close to
above
none of the above
QUESTION 10
Suppose a 10-year bond with a par value of $1000 has an annual coupon of 5% and a yield of 4%. What is the approximate present value of the coupon stream?
$306
$406
$506
$606
QUESTION 11
Suppose a 10-year bond with a par value of $1000 has an annual coupon of 5% and a yield of 4%. What is the approximate present value of the principal repayment?
$476
$576
$676
$776
QUESTION 12
Suppose a 10-year bond with a par value of $1000 has an annual coupon of 5% and a yield of 4%. What is the approximate price of this bond?
$1,081
$1,181
$1,281
$1,381
QUESTION 13
Suppose a 20-year bond with a par value of $1000 has a semiannual coupon of 5% and a yield of 4%. What is the approximate price of this bond?
$937
$1037
$1137
$1237
$1337
QUESTION 14
What is the approximate yield to maturity on a 5-year, 4% coupon bond (paid annually) with a par value of $1000 and a price of $956.71?
0.04
0.045
0.050
0.055
QUESTION 15
Which of the following bonds has the shortest duration?
5 year zero coupon
5-year, 5% coupon
10-year zero coupon
10-year, 5% coupon
QUESTION 16
What is the approximate duration of a 10-year, 7% coupon bond with annual coupons, a par value of $1,000 and a yield of 4%.
8
9
10
11
None of the above
QUESTION 17
If a bond portfolio manager expects interest rates to fall, she will _______ the duration of her bond portfolio.
shorten
maintain
increase
none of the above
QUESTION 18
Assume a 15-year zero has a yield of 4% and a par value of $1000. What is this bond's approximate price?
$540
$545
$550
$555
none of the above
QUESTION 19
Assume a 15-year zero has a yield of 5% and a par value of $1000. What is this bond's approximate price?
$481
$491
$501
$511
none of the above
QUESTION 20
Assume a 15-year zero has a yield of 4% and a par value of $1000. Using duration, what is the new bond's approximate price if interest rates rise by 1%?
$472
$482
$492
$502
none of the above