QUESTION 1
The nominal rate of interest is generally greater than the real rate of interest.
(Nominal interest rates will exceed real rates when the inflation rate is a positive number (as it usually is)GOOGLE)
True
False

QUESTION 2
A decrease in the corporate tax rate should increase the real rate of interest.
True
False

QUESTION 3
When government bond yields increase, we would expect the price of corporate bonds to increase.
True
False

QUESTION 4
The greater a bond's maturity, the higher is its price volatility.
True
False

QUESTION 5
If interest rates fall by 1%, a 10-year, 3% coupon bond will increase in price less than an otherwise equivalent zero-coupon bond.
True
False

QUESTION 6
Bond investors prefer bonds with positive rather than negative convexity.
True
False

QUESTION 7
Suppose that the 5-year treasury yield is 2.0%; the 5-years TIPS yield is .3%. What is the estimated 5-year inflation rate?

0.3%

1.2%

1.7%

2%

2.2%

QUESTION 8
Suppose the spot US$ to Euro rate S = 1.10; the 6-month borrowing rate in Euros = REuro= .01; the 6-month future exchange rate US$ to Euros F =1.13. What US$ 6-month interest rate (RUS) would preserve interest rate parity?

0.01

0.032

0.065

None of the Above

QUESTION 9
At issuance, bond coupon rates are usually set to be ______________ the market yield on similar bonds.

below

close to

above

none of the above

QUESTION 10
Suppose a 10-year bond with a par value of $1000 has an annual coupon of 5% and a yield of 4%. What is the approximate present value of the coupon stream?

$306

$406

$506

$606

QUESTION 11
Suppose a 10-year bond with a par value of $1000 has an annual coupon of 5% and a yield of 4%. What is the approximate present value of the principal repayment?

$476

$576

$676

$776

QUESTION 12
Suppose a 10-year bond with a par value of $1000 has an annual coupon of 5% and a yield of 4%. What is the approximate price of this bond?

$1,081

$1,181

$1,281

$1,381

QUESTION 13
Suppose a 20-year bond with a par value of $1000 has a semiannual coupon of 5% and a yield of 4%. What is the approximate price of this bond?

$937

$1037

$1137

$1237

$1337

QUESTION 14
What is the approximate yield to maturity on a 5-year, 4% coupon bond (paid annually) with a par value of $1000 and a price of $956.71?

0.04

0.045

0.050

0.055

QUESTION 15
Which of the following bonds has the shortest duration?

5 year zero coupon

5-year, 5% coupon

10-year zero coupon

10-year, 5% coupon

QUESTION 16
What is the approximate duration of a 10-year, 7% coupon bond with annual coupons, a par value of $1,000 and a yield of 4%.

8

9

10

11

None of the above

QUESTION 17
If a bond portfolio manager expects interest rates to fall, she will _______ the duration of her bond portfolio.

shorten

maintain

increase

none of the above

QUESTION 18
Assume a 15-year zero has a yield of 4% and a par value of $1000. What is this bond's approximate price?

$540

$545

$550

$555

none of the above

QUESTION 19
Assume a 15-year zero has a yield of 5% and a par value of $1000. What is this bond's approximate price?

$481

$491

$501

$511

none of the above

QUESTION 20
Assume a 15-year zero has a yield of 4% and a par value of $1000. Using duration, what is the new bond's approximate price if interest rates rise by 1%?

$472

$482

$492

$502

none of the above