投资学第7版Test-Bank答案16

Chapter16ManagingBondPortfolios360MultipleChoiceQuestions1.Thedurationofabondisafunctionofthebond'sA)couponrate.B)yieldtomaturity.C)timetomaturity.D)alloftheabove.E)noneoftheabove.Answer:DDifficulty:EasyRationale:Durationiscalculatedbydiscountingthebond'scashflowsatthebond'syieldtomaturityand,exceptforzero-couponbonds,isalwayslessthantimetomaturity.2.Ceterisparibus,thedurationofabondispositivelycorrelatedwiththebond'sA)timetomaturity.B)couponrate.C)yieldtomaturity.D)alloftheabove.E)noneoftheabove.Answer:ADifficulty:ModerateRationale:Durationisnegativelycorrelatedwithcouponrateandyieldtomaturity.3.Holdingotherfactorsconstant,theinterest-rateriskofacouponbondishigherwhenthebond's:A)term-to-maturityislower.B)couponrateishigher.C)yieldtomaturityislower.D)currentyieldishigher.E)noneoftheabove.Answer:CDifficulty:ModerateRationale:Thelongerthematurity,thegreatertheinterest-raterisk.Thelowerthecouponrate,thegreatertheinterest-raterisk.Thelowertheyieldtomaturity,thegreatertheinterest-raterisk.Theseconceptsarereflectedinthedurationrules;durationisameasureofbondpricesensitivitytointerestratechanges(interest-raterisk).Chapter16ManagingBondPortfolios3614.ThemodifieddurationusedbypractitionersisequaltotheMacaulaydurationA)timesthechangeininterestrate.B)times(oneplusthebond'syieldtomaturity).C)dividedby(oneminusthebond'syieldtomaturity).D)dividedby(oneplusthebond'syieldtomaturity).E)noneoftheabove.Answer:DDifficulty:ModerateRationale:D*=D/(1+y)5.Giventhetimetomaturity,thedurationofazero-couponbondishigherwhenthediscountrateisA)higher.B)lower.C)equaltotheriskfreerate.D)Thebond'sdurationisindependentofthediscountrate.E)noneoftheabove.Answer:DDifficulty:ModerateRationale:Thedurationofazero-couponbondisequaltothematurityofthebond.6.Theinterest-rateriskofabondisA)theriskrelatedtothepossibilityofbankruptcyofthebond'sissuer.B)theriskthatarisesfromtheuncertaintyofthebond'sreturncausedbychangesininterestrates.C)theunsystematicriskcausedbyfactorsuniqueinthebond.D)AandBabove.E)A,B,andCabove.Answer:BDifficulty:ModerateRationale:Changinginterestrateschangethebond'sreturn,bothintermsofthepriceofthebondandthereinvestmentofcouponpayments.Chapter16ManagingBondPortfolios3627.Whichofthefollowingtwobondsismorepricesensitivetochangesininterestrates?1)Aparvaluebond,X,witha5-year-to-maturityanda10%couponrate.2)Azero-couponbond,Y,witha5-year-to-maturityanda10%yield-to-maturity.A)BondXbecauseofthehigheryieldtomaturity.B)BondXbecauseofthelongertimetomaturity.C)BondYbecauseofthelongerduration.D)Bothhavethesamesensitivitybecausebothhavethesameyieldtomaturity.E)NoneoftheaboveAnswer:CDifficulty:ModerateRationale:Durationisthebestmeasureofbondpricesensitivity;thelongerthedurationthehigherthepricesensitivity.8.Holdingotherfactorsconstant,whichoneofthefollowingbondshasthesmallestpricevolatility?A)5-year,0%couponbondB)5-year,12%couponbondC)5year,14%couponbondD)5-year,10%couponbondE)Cannottellfromtheinformationgiven.Answer:CDifficulty:ModerateRationale:Duration(andthuspricevolatility)islowerwhenthecouponratesarehigher.9.Whichofthefollowingisnottrue?A)Holdingotherthingsconstant,thedurationofabondincreaseswithtimetomaturity.B)Giventimetomaturity,thedurationofazero-coupondecreaseswithyieldtomaturity.C)Giventimetomaturityandyieldtomaturity,thedurationofabondishigherwhenthecouponrateislower.D)Durationisabettermeasureofpricesensitivitytointerestratechangesthanistimetomaturity.E)Alloftheabove.Answer:BDifficulty:ModerateRationale:Thedurationofazero-couponbondisequaltotimetomaturity,andisindependentofyieldtomaturity.Chapter16ManagingBondPortfolios36310.Thedurationofa5-yearzero-couponbondisA)smallerthan5.B)largerthan5.C)equalto5.D)equaltothatofa5-year10%couponbond.E)noneoftheabove.Answer:CDifficulty:EasyRationale:Durationofazero-couponbondequalsthebond'smaturity.11.ThebasicpurposeofimmunizationistoA)eliminatedefaultrisk.B)produceazeronetinterest-raterisk.C)offsetpriceandreinvestmentrisk.D)AandB.E)BandC.Answer:EDifficulty:ModerateRationale:Whenaportfolioisimmunized,priceriskandreinvestmentriskexactlyoffseteachotherresultinginzeronetinterest-raterisk.12.Thedurationofaparvaluebondwithacouponrateof8%andaremainingtimetomaturityof5yearsisA)5years.B)5.4years.C)4.17years.D)4.31years.E)noneoftheabove.Answer:DDifficulty:ModerateRationale:Calculationsareshownbelow.Yr.CFPVofCF@08%Weight*Yr.1$80$80/1.08=$74.070.0741*1=0.07412$80$80/(1.08)2=$68.590.0686*2=0.13723$80$80/(1.08)3=$63.510.0635*3=0.19054$80$80/(1.08)4=$58.800.0588*4=0.23525$1,080$1,080/(1.08)5=$735.030.7350*5=3.6750Sum$1000.004.3120yrs.(duration)Chapter16ManagingBondPortfolios36413.Thedurationofaperpetuitywithayieldof8%isA)13.50years.B)12.11years.C)6.66years.D)cannotbedetermined.E)noneoftheabove.Answer:ADifficulty:EasyRationale:D=1.08/0.08=13.50years.14.Aseven-yearparvaluebondhasacouponrateof9%andamodifieddurationofA)7years.B)5.49years.C)5.03years.D)4.87years.E)noneoftheabove.Answer:CDifficulty:DifficultRationale:Calculationsareshownbelow.Yr.CFPVofCF@9%Weight*Yr.1$90$82.570.0826X1=0.08262$90$75.750.0758X2=0.15163$90$6