1. federal notes and bond are quoted on a price basis in points with one point showing 1% of the par value. These points are split in 32nd and can have a + sign. Thus, a quote of 88 – 17 + for a $10,000 face value bond shows a price of:

a. $8,833

b. $8,856.25

c. $8,816

d. $8,854.68

2. one of the problems of using the current yield as a return measure is:

a. it double counts the capital gains

b. time value of money is ignored in calculation

c. the capital loss is over emphasized

d. all of the above are true

3. for a given yield and modified duration, the lower the coupon the:

a. smaller the convexity

b. larger the convexity

c. lower the Macaulary duration

d. none of these are true

4. the YTM has a distinct impact on the bond value. Bond value:

a. goes up when YTM goes up

b. goes down when YTM goes up

c. goes down when YTM goes down

d. only a and c are true