Bond Prices and Yields

Multiple Choice Questions

1. Which one of the following is the correct definition of a coupon rate?

A. semi-annual interest payment/par value

B. annual interest/par value

C. annual interest/market value

D. semi-annual coupon/bond price

E. annual coupon/bond price

2. What is the annual interest divided by the market price of a bond called?

A. coupon rate

B. effective annual yield

C. current yield

D. yield to maturity

E. yield to market

3. The yield to maturity is the:

A. discount rate that equates a bond's price with the present value of the bond's future cash flows.

B. rate you will earn if your bond is called on the earliest possible date.

C. rate computed by dividing the annual interest by the par value.

D. rate used to compute the amount of each interest payment.

E. rate computed as the annual interest divided by the market value.

4. A premium bond is defined as a bond that:

A. has a duration that is less than 1.0.

B. has a face value that exceeds its market value.

C. is callable at a price which exceeds the face value.

D. has a market price that exceeds par value.

E. is selling for less than face value.

5. A discount bond:

A. pays a variable coupon payment.

B. has a market price in excess of face value.

C. has a duration that is less than that required by an investor.

D. has a par value that is less than $1,000.

E. has a face value that exceeds the market value.

6. The price of a bond, net of accrued interest, is referred to as the bond's:

A. dirty price.

B. par value.

C. clean price.

D. maturity value.

E. discount value.

7. The dirty price of a bond is the:

A. invoice price.

B. quoted price.

C. issue price.

D. average of the bid and asked prices.

E. dealer purchase price.

8. A callable bond:

A. can be paid off early at either the issuer's or the bondholder's request.

B. can be redeemed early if the bondholder so requests.

C. can have its maturity date extended by the issuer.

D. can be redeemed by the issuer prior to maturity.

E. is a bond that pays a variable interest payment.

9. Which one of the following does an issuer pay to redeem a bond prior to maturity?

A. par value

B. face value

C. put price

D. call price

E. discounted price

10. Which one of the following prices is equal to the present value of a bond's future cash flows and is paid when a bond is redeemed prior to maturity?

A. call protected

B. face value

C. make-whole call

D. tender-offer

E. deferred

11. An issuer has a bond outstanding that matures in 18 years. Which one of the following prevents the issuer from buying back that bond today?

A. make-whole provision

B. call protection period

C. newly issued provision

D. put provision

E. call premium

12. The yield that a bond will earn given that it is bought back by the issuer at the earliest possible date is the:

A. market yield.

B. current yield.

C. yield to maturity.

D. yield to put.

E. yield to call.

13. Which one of the following is the risk that market interest rates may increase causing the price of a bond to decline?

A. inflation risk

B. reinvestment risk

C. yield risk

D. interest rate risk

E. default risk

14. The rate of return an investor actually earns from owning a bond is called which one of the following?

A. market return

B. realized yield

C. annualized coupon yield

D. maturity yield

E. call yield

15. Which one of the following measures a bond's sensitivity to changes in market interest rates?

A. yield to call

B. yield to market

C. duration

D. immunization

E. target date valuation

16. A change in a bond's price caused by which one of the following is defined as the dollar value of an 01?

A. change in yield to call due to passage of one year

B. change in yield to maturity of one percent

C. change in yield to maturity of one basis point

D. change in coupon rate of one percent

E. change in coupon rate of one basis point

17. The yield value of a 32nd is the change needed in which one of the following to cause a bond's price to change by 1/32nd?

A. current yield

B. yield to maturity

C. coupon rate

D. call premium

E. call date

18. A dedicated portfolio is a bond portfolio created to:

A. maximize current interest income.

B. provide an increasing steady stream of income.

C. maximize the return given declining interest rates.

D. fund a future cash outlay.

E. avoid taxation.

19. Which one of the following risks is associated with investing a coupon payment at a rate that is lower than the bond's yield-to-maturity?

A. reinvestment rate risk

B. current rate risk

C. payment risk

D. current yield risk

E. maturity risk

20. Which one of the following involves creating a portfolio in a manner which minimizes the uncertainty of the portfolio's maturity target date value?

A. duration

B. reinvestment

C. immunization

D. modification

E. call protection

21. Price risk is the risk that:

A. coupon payments will be reinvested at a rate that is less than the bond's yield-to-maturity.

B. the bond principal will not be paid in full or on time.

C. the bonds in a dedicated portfolio will decrease in value in response to an increase in interest rates.

D. market prices increase due to market interest rate changes making bonds more expensive to purchase.

E. the yield-to-maturity will be less than the inflation risk causing the real rate of return to be negative.

22. Periodically rebalancing a portfolio so that the duration continues to match the target date is called:

A. risk assessment.

B. duration testing.

C. dedication matching.

D. portfolio matching.

E. dynamic immunization.

23. A basic bond that has a face value of $1,000 and pays regular semiannual coupon payments is referred to as which one of the following?

A. pure discount bond

B. premium bond

C. inflation bond

D. straight bond

E. conversion bond

24. Which of the following will increase if the coupon rate increases?

I. face value
II. market value
III. yield-to-maturity
IV. current yield

A. I and II only

B. III and IV only

C. I, II, and III only

D. II, III, and IV only

E. I, II, III, and IV

25. Which one of the following will decrease the current yield of a bond?

A. increase in the face value

B. change from semi-annual to annual coupon payments

C. decrease in the call premium

D. decrease in the coupon rate

E. decrease in the bond price

26. Which one of the following will occur if a bond's discount rate is lowered?

A. market price will increase

B. coupon payment amount will decrease

C. current yield will increase

D. call premium will increase

E. coupon rate will decrease

27. Which one of the following statements is correct concerning premium bonds?

A. The premium increases when interest rates increase.

B. The coupon rate is less than the current yield.

C. As the time to maturity decreases, the premium increases.

D. The yield to maturity is less than the coupon rate.

E. The par value exceeds the face value.

28. Which one of the following statements is correct concerning discount bonds?

A. The current yield is less than the yield to maturity.

B. The bonds will be redeemed at maturity for less than face value.

C. The coupon rate is greater than the current yield.

D. The clean price is greater than the dirty price.

E. Only zero-coupon bonds sell at a discount.

29. Which one of the following statements applies to a par value bond?

A. The current yield is less than the coupon rate.

B. The yield-to-maturity equals the risk-free, or Treasury bill, rate.

C. The par value exceeds the market price.

D. The current yield, coupon rate, and yield-to-maturity are equal.

E. The dirty price equals the clean price.

30. Assuming there is no default risk, both a premium bond and a discount bond must share which one of the following characteristics?

A. market price less than a par value bond

B. yield-to-maturity less than the coupon rate

C. maturity value equal to a par value bond

D. current yield equal to that of a par value bond

E. coupon rate exceeding the yield-to-maturity

31. A bond has a current yield that is equal to the yield-to-maturity. Given this, which one of the following must also be true?

A. The bond must pay annual interest.

B. The maturity value must be greater than the bond price.

C. The bond can have any maturity date.

D. The coupon rate must exceed the current yield.

E. The price must exceed the par value.

32. For a premium bond, the:

A. current yield is equal to the coupon rate but less than the yield to maturity.

B. yield to maturity exceeds both the coupon rate and the current yield.

C. coupon rate is equal to the yield to maturity but less than the current yield.

D. current yield is less than either the coupon rate or the yield to maturity.

E. coupon rate exceeds both the yield to maturity and the current yield.

33. Davis Industrial bonds have a current market price of $990 and a 6 percent coupon. The bonds pay interest semi-annually on March 1 and September 1. Assume today is January 1. How many months of accrued interest are included in the dirty price of these bonds?

A. zero

B. two

C. three

D. four

E. five

34. A bond pays interest semiannually on February 1 and August 1. Assume today is October 1. How many months of accrued interest are included in the clean price of this bond?

A. zero

B. two

C. three

D. four

E. five

35. The yield-to-maturity assumes which one of the following?

A. The bond is purchased at par value.

B. All interest payments earn the latest rate of market interest.

C. The bond is called on the earliest possible date.

D. The bond is a pure discount bond.

E. All coupon payments are reinvested at the yield-to-maturity rate.

36. Which one of the following increases the probability that a bond will be called?

A. The call premium is relatively high.

B. The bond is within the call protection period.

C. The bond was issued within the past year.

D. Market interest rates decline.

E. The bond is selling at par.

37. Which one of the following statements is correct concerning a callable bond that is currently selling below face value? Assume there is no risk of default. Also assume the issuer only calls bonds when they can be refinanced at a lower rate of interest.

A. The bond will most likely be called while the bonds are selling at a discount.

B. The yield-to-maturity is presently more relevant to an investor than the yield-to-call.

C. The bond is likely going to be called due to the low current interest rates.

D. The bond is currently paying a premium.

E. The bond issue will most likely be replaced with a new bond issue.

38. Which one of the following statements is correct?

A. Investors know the rate of return they will earn with certainty provided they hold bonds until they mature.

B. Reinvestment risk causes realized yields to differ from promised yields.

C. Realized yields generally equal promised yields as long as a bond is not called.

D. Redeeming a bond early helps ensure an investor earns the promised yield.

E. Realized yields cannot exceed promised yields.

39. According to Malkiel's theorems, bond prices and bond yields are:

A. inversely related.

B. uncorrelated.

C. positively related.

D. directly related.

E. independent of each other.

40. Which combination of bond characteristics causes a bond to be most sensitive to changes in market interest rates?

I. low coupon rates
II. high coupon rates
III. short time to maturity
IV. long time to maturity

A. III only

B. I and III only

C. I and IV only

D. II and III only

E. II and IV only

41. How does the size of the change in a bond's price react in response to a given change in the yield to maturity as the time to maturity increases?

A. decreases at an increasing rate

B. decreases at a diminishing rate

C. increases at a constant rate

D. increases at a diminishing rate

E. increases at an increasing rate

42. Which one of the following statements is correct according to Malkiel's Theorems?

A. For a given change in a bond's yield to maturity, the shorter the term to maturity, the greater will be the magnitude of the change in the bond's price.

B. The price of an outstanding bond is unaffected by changes in market interest rates.

C. The size of the change in a bond's price increases at a constant rate given even incremental increases in a bond's yield-to-maturity even as the term to maturity lengthens.

D. For a given change in a bond's yield-to-maturity, the absolute magnitude of the resulting change in the bond's price is directly related to the bond's coupon rate.

E. For a given absolute change in a bond's yield-to-maturity, a decrease in yield will cause a greater change in the bond's price than will an increase in yield.

43. Which one of the following must be equal for two bonds if they are to have similar changes in their prices given a relatively small change in bond yields?

A. coupon payment

B. time to maturity

C. market price

D. duration

E. current yield

44. All else constant, which of the following will decrease the Macaulay duration of a straight bond?

I. reducing the coupon payment
II. shortening the time to maturity
III. lowering the yield to maturity

A. I only

B. II only

C. II and III only

D. I and II only

E. I and III only

45. Which one of the following statements is correct concerning Macaulay duration?

A. The duration of a zero coupon bond is equal to the time to maturity.

B. Most bonds have durations in excess of 15 years.

C. The duration of a coupon bond is a linear function between the time to maturity and the duration.

D. The duration of a coupon bond is greater than that of a zero coupon bond given equal maturity dates.

E. The percentage change in a bond's price is approximately equal to the change in the yield to maturity multiplied by (-1 × Macaulay duration).

46. The modified duration:

A. is equal to the Macaulay duration divided by (1 + Yield to maturity).

B. multiplied by (-1 × Change in the yield to maturity) equals the approximate percentage change in a bond's price.

C. will be the same for any bonds that have equal times to maturity.

D. only applies to pure discount securities.

E. must be converted to a Macaulay duration before computing the percentage change in a bond's price.

47. To immunize your portfolio, you should:

A. avoid callable bonds.

B. match bond maturity dates to your target dates.

C. match bond durations to your target dates.

D. purchase only par value bonds.

E. purchase only high-coupon bonds.

48. Last year, you created an immunized portfolio with an average maturity date of 14.5 years, a yield-to-maturity of 9.8 percent, and a duration of 9.6 years. According to the policy of dynamic immunization, you should now modify your portfolio in which one of the following ways?

A. modify the yield-to-maturity to 9.1 percent

B. modify the portfolio so the average maturity remains at 14.5 years

C. modify the portfolio so the average maturity becomes 13.5 years

D. modify the portfolio so the duration remains at 9.6 years

E. modify the portfolio so the duration becomes 8.6 years

49. Dynamic immunization is primarily aimed at reducing which one of the following risks?

A. default

B. liquidity

C. reinvestment

D. inflation

E. taxation

50. A bond pays semiannual interest payments of $42.50. What is the coupon rate if the par value is $1,000?

A. 5.75 percent

B. 6.50 percent

C. 7.80 percent

D. 8.50 percent

E. 9.38 percent

51. A bond has a face value of $1,000 and a coupon rate of 5.5 percent. What is your annual interest payment if you own 8 of these bonds?

A. $110

B. $220

C. $330

D. $440

E. $880

52. A bond has a par value of $1,000 and a coupon rate of 6.5 percent. What is the dollar amount of each semiannual interest payment if you own 8 of these bonds?

A. $180

B. $260

C. $320

D. $420

E. $840

53. A bond has a par value of $1,000, a market price of $1,012, and a coupon rate of 5.75 percent. What is the current yield?

A. 5.68 percent

B. 5.71 percent

C. 5.75 percent

D. 5.78 percent

E. 5.80 percent

54. A 5.5 percent coupon bond has a face value of $1,000 and a current yield of 5.64 percent. What is the current market price?

A. $975.18

B. $989.18

C. $1,011.82

D. $3,933.43

E. $4,067.47

55. A bond has 8 years to maturity, a 7 percent coupon, a $1,000 face value, and pays interest semiannually. What is the bond's current price if the yield to maturity is 6.91 percent?

A. $799.32

B. $848.16

C. $917.92

D. $1,005.46

E. $1,009.73

56. The Country Inn has bonds outstanding with a par value of $1,000 each and a 6.6 percent coupon. The bonds mature in 7.5 years and pay interest semiannually. What is the current value of each of these bonds if the yield to maturity is 6.8 percent?

A. $988.40

B. $1,003.29

C. $1,005.88

D. $1,008.36

E. $1,009.47

57. Last year, BT Motors issued 10-year bonds with a 9 percent coupon and semi-annual interest payments. What is the market price of a $1,000 bond if the yield to maturity is 8.9 percent?

A. $1,003.97

B. $1,006.53

C. $1,042.89

D. $1,414.14

E. $1,585.36

58. A $1,000 face value bond matures in 11 years, pays interest semiannually, and has a 6.5 percent coupon. The bond currently sells for $1,025. What is the yield to maturity?

A. 6.17 percent

B. 6.18 percent

C. 6.28 percent

D. 6.34 percent

E. 6.37 percent

59. A $1,000 par value 5 percent Treasury bond pays interest semiannually and matures in 7.5 years. What is the yield to maturity if the bond is currently quoted at a price of 112.34?

A. 3.14 percent

B. 3.18 percent

C. 3.23 percent

D. 6.28 percent

E. 6.36 percent

60. A $1,000 semiannual coupon bond matures in 15 years, has a coupon rate of 7.5 percent, and a market price of $982. What is the yield to maturity?

A. 3.86 percent

B. 4.01 percent

C. 4.08 percent

D. 7.53 percent

E. 7.70 percent

61. An 8.5 percent coupon bond pays interest semiannually and has 10.5 years to maturity. The bond has a face value of $1,000 and a market value of $878.50. What is the yield to maturity?

A. 5.16 percent

B. 8.37 percent

C. 8.78 percent

D. 10.43 percent

E. 11.21 percent

62. A $1,000 par value bond is currently valued at $1,037.84. The bond pays interest semi-annually, has 7 years to maturity, and has a yield to maturity of 7.3 percent. The coupon rate is _____ percent and the current yield is _____ percent.

A. 6.80; 7.21

B. 8.00; 7.71

C. 8.00; 7.81

D. 8.50; 8.22

E. 8.50; 8.30

63. A $1,000 face value bond is selling for $1,016.36. The bond pays interest semiannually and has 3.5 years to maturity. The yield to maturity is 5.48 percent. The current yield is _____ percent and the coupon rate is _____ percent.

A. 5.86; 5.90

B. 5.90; 6.00

C. 5.90; 5.86

D. 6.00; 5.90

E. 6.00; 5.86

64. The outstanding bonds of International Plastics mature in 6 years and pay semiannual interest payments of $33.50 on a $1,000 face value bond. The bonds are currently selling for $1,008.64. The coupon rate is _____ percent, the current yield is _____ percent, and the yield to maturity is _____ percent.

A. 6.70; 6.64; 6.52

B. 6.70; 6.78; 6.57

C. 6.64; 6.83; 6.57

D. 6.55; 6.86; 6.60

E. 6.55; 6.91; 6.75

65. A bond has a $1,000 par value, semiannual interest payments of $40, and a current market value of $1,054. The bonds mature in 12.5 years. The coupon rate is _____ percent, the current yield is _____ percent, and the yield to maturity is _____ percent.

A. 8.00; 7.67; 7.72

B. 8.00; 7.72; 7.64

C. 8.00; 7.59; 7.33

D. 8.50; 7.87; 7.73

E. 8.50; 8.12; 8.19

66. Alaskan Motors has outstanding bonds that mature in 13 years and pay $34.50 every 6 months in interest. The par value is $1,000 per bond and the market value is $990. The coupon rate is _____ percent, the current yield is _____ percent, and the yield to maturity is _____ percent.

A. 6.90; 6.57; 6.67

B. 6.90; 6.73; 6.71

C. 6.90; 6.97; 7.02

D. 7.00; 7.37; 7.07

E. 7.00; 7.67; 7.21

67. You are considering two bonds. Both have semi-annual, 8 percent coupons, $1,000 face values, and yields to maturity of 7.5 percent. Bond S matures in 4 years and Bond L matures in 8 years. What is the difference in the current prices of these bonds?

A. $10.51

B. $11.33

C. $11.52

D. $12.67

E. $12.88

68. Two bonds have a coupon rate of 6.5 percent, semi-annual payments, face values of $1,000, and yields to maturity of 7.1 percent. Bond S matures in 6 years and bond L matures in 12 years. What is the difference in the current prices of these bonds?

A. $15.26

B. $16.19

C. $17.40

D. $18.38

E. $19.02

69. You want to buy a bond that has a quoted price of $923. The bond pays interest semiannually on April 1 and October 1. The coupon rate is 6 percent. What is the clean price of this bond if today's date is June 1? Assume a 360-day year.

A. $927.62

B. $923.00

C. $923.23

D. $936.85

E. $1,076.83

70. You are buying a bond at a quoted price of $892. The bond has a 7.5 percent coupon and pays interest semiannually on February 1 and August 1. What is the dirty price of this bond if today is April 1? Assume a 360-day year.

A. $896.17

B. $904.50

C. $913.67

D. $938.50

E. $942.00

71. Green Roofing Materials has 7.5 percent bonds outstanding that are currently priced at $1,068 each. The bonds pay interest on December 1 and June 1. What is the dirty price of this bond if today's date is May 1? Assume a 360-day year.

A. $1,099.25

B. $1,105.75

C. $1,112.00

D. $1,118.25

E. $1,124.50

72. You own a bond that pays semiannual interest payments of $38. The bond is callable in 2 years at a premium of $76. What is the callable bond price if the yield to call is 7.9 percent?

A. $995.46

B. $1,016.86

C. $1,059.64

D. $1,124.87

E. $1,220.87

73. Ted owns a bond which is callable in 2.5 years. The bond has a 6 percent coupon, pays interest semiannually, has a par value of $1,000, and has a yield to call of 6.3 percent. What is the call premium if the bond currently sells for $1,044.54?

A. $50

B. $60

C. $70

D. $75

E. $80

74. Cochran's Furniture Outlet is issuing 25-year, 9 percent callable bonds. These bonds are callable in 4 years with a call premium of $45. The bonds are being issued at par and pay interest semi-annually. What is the yield to call?

A. 9.94 percent

B. 10.72 percent

C. 11.00 percent

D. 11.47 percent

E. 12.08 percent

75. Blue Water Homes has 8 percent bonds outstanding that mature in 13 years. The bonds pay interest semiannually. These bonds have a par value of $1,000 and are callable in 2 years at a premium of $75. What is the yield to call if the current price is equal to 103.25 percent of par?

A. 7.51 percent

B. 7.70 percent

C. 8.06 percent

D. 8.98 percent

E. 9.66 percent

76. Will owns a bond with a make-whole call provision. The bond matures in 13 years but is being called today. The coupon rate is 8.25 percent with interest paid semiannually. What is the current call price if the applicable discount rate is 7.75 percent and the make-whole call provision applies?

A. $932.84

B. $957.11

C. $1,040.51

D. $1,110.28

E. $1,128.66

77. Ferrous Metals has bonds outstanding which it is calling today under the make-whole call provision. The bonds mature in 6 years, have a 10 percent coupon, pay interest semiannually, and have a par value of $1,000. What is today's call price given that the applicable discount rate is 7.20 percent?

A. $879.12

B. $968.35

C. $1,015.55

D. $1,134.49

E. $1,172.71

78. Alex purchased a $1,000 par value bond one year ago at a price of $1,016. At the time of purchase, the bond had 12 years to maturity and a 5 percent, semiannual coupon. Today, the bond has a yield to maturity of 5.25 percent. What is his realized yield as of today?

A. 0.43 percent

B. 0.86 percent

C. 1.19 percent

D. 1.32 percent

E. 2.60 percent

79. One year ago, you purchased a $1,000 face value bond at a yield to maturity of 9.45 percent. The bond has a 9 percent coupon and pays interest semiannually. When you purchased the bond, it had 12 years left until maturity. You are selling the bond today when the yield to maturity is 8.20 percent. What is your realized yield on this bond?

A. 14.54 percent

B. 15.27 percent

C. 16.35 percent

D. 17.60 percent

E. 18.11 percent

80. You own a 6.5 percent, semiannual coupon bond that matures in 7 years. The par value is $1,000 and the current yield to maturity is 6.8 percent. What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 75 basis points?

A. -4.05 percent

B. -4.19 percent

C. -4.24 percent

D. -4.31 percent

E. -4.47 percent

81. Phil owns a 7 percent, semiannual coupon bond that has a face value of $1,000 and matures in 16 years. The bond has a current yield to maturity of 7.1 percent. What will the percentage change in the price of his bond be if interest rates decrease by 50 basis points?

A. 4.33 percent

B. 4.68 percent

C. 4.91 percent

D. 5.17 percent

E. 5.26 percent

82. A $1,000 face value bond has a 9.0 percent coupon and pays interest semiannually. The bond matures in 2 years and has a yield to maturity of 6.5 percent. What is the Macaulay duration?

A. 1.18 years

B. 1.65 years

C. 1.88 years

D. 2.03 years

E. 2.19 years

83. A zero-coupon bond has a par value of $1,000 and matures in 4.5 years. The yield to maturity is 6.4 percent. What is the Macaulay duration?

A. 3.67 years

B. 3.81 years

C. 3.92 years

D. 4.26 years

E. 4.50 years

84. A bond has a Macaulay duration of 6.25 years. What will be the percentage change in the bond price if the yield to maturity increases from 6 percent to 6.4 percent?

A. -2.23 percent

B. -2.43 percent

C. -3.30 percent

D. -3.38 percent

E. -3.46 percent

85. The price of a bond decreased by 1.45 percent in response to an increase in the yield to maturity from 7.2 to 7.6 percent. What is the bond's Macaulay duration?

A. 3.39 years

B. 3.76 years

C. 3.92 years

D. 4.04 years

E. 4.16 years

86. A bond has a Macaulay duration of 5.5, a yield to maturity of 6.1 percent, a coupon rate of 7.0 percent, and semiannual interest payments. What is the bond's modified duration?

A. 4.59 years

B. 5.34 years

C. 5.92 years

D. 6.06 years

E. 6.26 years

87. A 6 percent, semiannual coupon bond has a yield to maturity of 7.4 percent and a Macaulay duration of 5.7. The bond has a modified duration of _____ and will have a _____ percentage increase in price in response to a 25 basis point decrease in the yield to maturity.

A. 5.4829; 1.35

B. 5.4966; 1.32

C. 5.4966; 1.37

D. 5.3073; 1.33

E. 5.3073; 1.38

88. A bond has a modified duration of 7.22 and a yield to maturity of 8.1 percent. If interest rates increase by 75 basis points, the bond's price will decrease by _____ percent.

A. -0.46

B. -0.54

C. -4.60

D. -5.42

E. -6.18

89. The outstanding bonds of Alpha Extracts have a yield to maturity of 8.4 percent and a modified duration of 10.8. If the yield to maturity instantly decreased to 7.5 percent, the bond's price would increase/decrease by _____ percent.

A. -10.08

B. -9.67

C. 8.45

D. 9.72

E. 10.08

90. A bond has a modified duration of 5.87 years, a par value of $1,000, and a current market value of $1,008. What is the dollar value of an 01?

A. $0.0698

B. $0.0700

C. $0.5917

D. $0.6401

E. $0.7023

91. Jefferson-Smith bonds are quoted at a price of $952.42 for a $1,000 face value bond. These bonds have a modified duration of 9.84. What is the dollar value of an 01?

A. $0.0977

B. $0.0963

C. $0.1028

D. $0.9372

E. $0.9767

92. A bond has a dollar value of an 01 of .0684. What is the yield value of a 32nd?

A. .4408

B. .4569

C. .4629

D. .4847

E. .5084

Essay Questions

93. Explain the conditions under which an investor should place more reliance on the yield-to-call than on the yield-to-maturity.

94. Josh is saving money to purchase a home in 9 years. Explain why Josh should create a coupon bond portfolio with a duration of 9 years, rather than purchasing coupon bonds that mature in 9 years.

95. Identify and briefly explain four of Malkiel's five theorems.