1. Which of the following most closely related to the concept of “the interest rate?”
a) The coupon rate
b) The yield to maturity
c) The current yield
d) none of the above.
2. What is the duration of a 20 year zero-coupon bond?
a) 10
b) 12.50
c) 15
d) none of the above.
3. A bond has a modified duration of 12 and a convexity of 188. If interest rates go down by 100 bps, what will the percent change in the full price of the bond be, approximately?
a) -12.94%
b) 12.94%
c) 12.00%
d) none of the above.
4. What is the duration gap for an investor with a 10 year investment horizon who invests in a bond with a duration of 12?
a) 2
b) -2
c) 0
d) none of the above.