Multiple Choice Questions
Instructions:
- There are 10 questions. Choose the best answer to each question and write your answer choice (A, B, C, D or E) on Canvas. Each question is worth 10 points.
- The questions will be graded according to the Course Syllabus. Your Excel spreadsheet files will serve as evidence of your work.
- Submit the answers together with your Excel spreadsheets file on Canvas.
- Make sure you do your works CLEARLY and NEATLY. Untidy work will result in a 1 point penalty per question.
Questions
Questions 1 and 2 are directed at Task 1
- What is the invoice price when the settlement date is 30th June 2021?
- 932.68
- 933.49
- 940.63
- 943.15
- 951.18
- What is the invoice price when the settlement date is 5th September 2021?
- 932.68
- 933.49
- 940.63
- 943.15
- 951.18
Questions 3 to 8 are directed at Task 2
- What is the Macaulay duration and modified duration of the zero-coupon bond with the yield to maturity of 6% maturing on 30th June 2027?
- Macaulay duration = 6.0000, modified duration = 5.6604
- Macaulay duration = 6.1113, modified duration = 5.9333
- Macaulay duration = 5.3532, modified duration = 5.1972
- Macaulay duration = 8.4740, modified duration = 8.2272
- Macaulay duration = 5.0290, modified duration = 4.8825
- What is the Macaulay duration and modified duration of the 4% semi-annual coupon payment bond with the yield to maturity of 6% maturing on 30th June 2027?
- Macaulay duration = 6.0000, modified duration = 5.6604
- Macaulay duration = 6.1113, modified duration = 5.9333
- Macaulay duration = 5.3532, modified duration = 5.1972
- Macaulay duration = 8.4740, modified duration = 8.2272
- Macaulay duration = 5.0290, modified duration = 4.8825
- What is the Macaulay duration and modified duration of the 7% semi-annual coupon payment bond with the yield to maturity of 6% maturing on 30th June 2027?
- Macaulay duration = 6.0000, modified duration = 5.6604
- Macaulay duration = 6.1113, modified duration = 5.9333
- Macaulay duration = 5.3532, modified duration = 5.1972
- Macaulay duration = 8.4740, modified duration = 8.2272
- Macaulay duration = 5.0290, modified duration = 4.8825
- Holding time to maturity and yield to maturity constant, what can you infer about a bond’s Macaulay duration and modified duration as the coupon rate decreases from 8% to 4%?
- Macaulay and modified durations remain unchanged.
- Macaulay and modified durations increase.
- Macaulay and modified durations decrease.
- Macaulay duration increases while modified duration decreases.
- Macaulay duration decreases while modified duration increases
- Suppose the bond’s annual coupon rate is 7%. What can you infer about the Macaulay duration as the maturity increases from 30th June 2027 to 30th June 2032?
- Macaulay duration stays the same.
- Macaulay duration increases.
- Macaulay duration decreases.
- None of the above.
- Suppose the bond’s annual coupon rate is 7% and the maturity date is 30th June 2027. What can you infer about the Macaulay duration as the yield to maturity decreases from 6% to 5%?
- Macaulay duration stays the same.
- Macaulay duration increases.
- Macaulay duration decreases.
- None of the above.
Questions 9 and 10 are directed at Task 3
- The current yield to maturity is 6%. What is the annualized convexity of the 7% semi-annual coupon payment bond maturing on 30th June 2027?
- 149.417
- 115.6984
- 37.3543
- 28.9246
- 19.53
- The yield to maturity rises from 6% to 10%. What is the approximate percentage price change of the bond if you consider both modified duration and convexity?
- -19.53%
- -17.22%
- 0.00%
- 17.22%
- 19.53%