1. Which of the following bonds has the greatest price risk?
a. A 10-year, $1,000 face value, 10% coupon bond with annual interest payments.
b. A 10-year, $1,000 face value, 10% coupon bond with semiannual interest payments.
c. A 10-year $100 annuity.
d. A 10-year, $1,000 face value, zero coupon bond.
e. All 10-year bonds have the same price risk since they have the same maturity.
2. If a floater is priced at a premium above par value, the quoted margin is greater than the discount margin.
a. True
b. False
3. Which of the following statements is CORRECT?
(A) Dow Jones Industrial Average is a value-weighted index.
(B) S&P 500 index consists of 30 major stocks.
(C) If the stock price of Apple increases by 1 dollar, then DJIA will increase by about 14.6 cents, assuming the prices of all other stocks remain the same.
(D) If you construct a portfolio that consists of all the assets over the world, then the portfolio becomes risk free asset.
(E) Market risk is non-diversifiable.