Multiple Choice Questions
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.
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%
