Question 1

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?

Accepted Answer

11ea6d0e_c3ee_fb5b_b3c7_31580557eca8_TB1223_00

Question 2

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.

Accepted Answer

Percentage change in bond price = -7.22 × 0.0075 = -5.42 percent

Question 3

A zero-coupon bond has a par value of $1,000 and matures in 6.5 years.The yield to maturity is 5.5 percent.What is the Macaulay duration?

Accepted Answer

The duration of a zero-coupon bond is equal to the time to maturity. Thus, the answer is 6.5 years.

Question 4

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?

Accepted Answer

11ea6d0e_c3ee_8626_b3c7_81b08a6d46c9_TB1223_00 Using a financial calculator:
 11ea6d0e_c3ee_8627_b3c7_ed37b18e9e46_TB1223_00 Using a financial calculator:
 11ea6d0e_c3ee_8628_b3c7_fd6f65331bbf_TB1223_00 Percentage change in bond price = ($1,039.16 - $990.53)/$990.53 = 4.91 percent

Question 5

A bond has a Macaulay duration of 4.5,a yield to maturity of 5.1 percent,a coupon rate of 6.0 percent,and semiannual interest payments.What is the bond's modified duration?

Accepted Answer

11ea6d0e_c3ef_e5c8_b3c7_352789f111a7_TB1223_00

Question 6

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.

Accepted Answer

11ea6d0e_c3ef_226d_b3c7_57a44bfcfaf6_TB1223_00 Percentage change in bond price = -5.4966 × -0.0025 = 1.37 percent

Question 7

A bond has a dollar value of an 01 of 0.0748.What is the yield value of a 32^nd?

Accepted Answer

Yield value of a 32^nd » 1 / (32 × 0.0748) = 0.4178

Question 8

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?

Accepted Answer

11ea6d0e_c3ee_d44a_b3c7_f140f447ecb0_TB1223_00

Question 9

The outstanding bonds of Alpha Extracts have a yield to maturity of 7.4 percent and a modified duration of 11.8.If the yield to maturity instantly decreased to 6.8 percent,the bond's price would increase/decrease by ________ percent.

Accepted Answer

Percentage change in bond price = -11.8 × (0.068 - 0.074) = 7.08 percent

Question 10

Two bonds have a coupon rate of 4.25 percent,semi-annual payments,face values of $1,000,and yields to maturity of 5.1 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?

Accepted Answer

Bond S:
 11ea6d0e_c3ef_97a1_b3c7_a35fe614793b_TB1223_00 Using a financial calculator:
 11ea6d0e_c3ef_97a2_b3c7_49ce7c381428_TB1223_00 Bond L:
 11ea6d0e_c3ef_97a3_b3c7_f1df1fa6aa39_TB1223_00 Using a financial calculator:
 11ea6d0e_c3ef_beb4_b3c7_0b997abb35a6_TB1223_00 Difference = $969.59 - $944.73 = $24.86

Question 11

A bond pays semiannual interest payments of $38.25.What is the coupon rate if the par value is $1,000?

Accepted Answer

Coupon rate = ($38.25 × 2) / $1,000 = 7.65 percent

Question 12

Hallmark's Furniture Outlet is issuing 15-year,7.5 percent callable bonds.These bonds are callable in 5 years with a call premium of $37.50.The bonds are being issued at par and pay interest semi-annually.What is the yield to call?

Accepted Answer

Using a financial calculator:
 11ea6d0e_c3ef_beb5_b3c7_bb5ebaf0db68_TB1223_00

Question 13

A bond has a dollar value of an 01 of 0.0710.What is the yield value of a 32^nd?

Accepted Answer

Yield value of a 32^nd » 1 / (32 × 0.0710) = 0.4401

Question 14

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?

Accepted Answer

11ea6d0e_c3ee_ad39_b3c7_112afc91b6d0_TB1223_00

Question 15

A bond has a Macaulay duration of 4.5,a yield to maturity of 5.1 percent,a coupon rate of 6.0 percent,and semiannual interest payments.What is the bond's modified duration?

Accepted Answer

11ea6d0e_c3ee_fb5c_b3c7_8d287c3bd2fe_TB1223_00

Question 16

The Seaside Inn has bonds outstanding with a par value of $1,000 each and a 4.30 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 5.0 percent?

Accepted Answer

11ea6d0e_c3ef_708e_b3c7_9b89a24f6eb9_TB1223_00 Using a financial calculator:
 11ea6d0e_c3ef_708f_b3c7_994ddea6b528_TB1223_00

Question 17

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?

Accepted Answer

Dollar value of an 01 » 9.84 / 100 × $952.42 × 0.01 = $0.9372

Question 18

You own a 6.5 percent,semiannual coupon bond that matures in 12 years.The par value is $1,000 and the current yield to maturity is 6.4 percent.What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 25 basis points?

Accepted Answer

11ea6d0e_c3ef_e5c6_b3c7_31da50dabf5f_TB1223_00 11ea6d0e_c3ef_e5c7_b3c7_4f1151e6fddb_TB1223_00 Percentage change in bond price = ($1,008.29 - $987.73) / $987.73= -2.04 percent

Question 19

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?

Accepted Answer

Dollar value of an 01 » 5.87 / 100 × $1,008 × 0.01 = $0.5917

Question 20

A $1,000 par value bond is currently valued at $1,050.The bond pays interest semi-annually,has 9 years to maturity,and has a yield to maturity of 7.72 percent.The coupon rate is ________ percent and the current yield is ________ percent.

Accepted Answer

Using a financial calculator:
 11ea6d0e_c3ef_7090_b3c7_674b405ded26_TB1223_00 Coupon rate = ($42.50 × 2) / $1,000 = 8.50 percent
Current yield = ($42.50 × 2) / $1,050.00 = 8.10 percent

Quiz 10: Bond Prices and Yields

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 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 zero-coupon bond has a par value of $1,000 and matures in 6.5 years.The yield to maturity is 5.5 percent.What is the Macaulay duration?

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 bond has a Macaulay duration of 4.5,a yield to maturity of 5.1 percent,a coupon rate of 6.0 percent,and semiannual interest payments.What is the bond's modified duration?

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 bond has a dollar value of an 01 of 0.0748.What is the yield value of a 32^nd?

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?

The outstanding bonds of Alpha Extracts have a yield to maturity of 7.4 percent and a modified duration of 11.8.If the yield to maturity instantly decreased to 6.8 percent,the bond's price would increase/decrease by ________ percent.

Two bonds have a coupon rate of 4.25 percent,semi-annual payments,face values of $1,000,and yields to maturity of 5.1 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 bond pays semiannual interest payments of $38.25.What is the coupon rate if the par value is $1,000?

Hallmark's Furniture Outlet is issuing 15-year,7.5 percent callable bonds.These bonds are callable in 5 years with a call premium of $37.50.The bonds are being issued at par and pay interest semi-annually.What is the yield to call?

A bond has a dollar value of an 01 of 0.0710.What is the yield value of a 32^nd?

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 bond has a Macaulay duration of 4.5,a yield to maturity of 5.1 percent,a coupon rate of 6.0 percent,and semiannual interest payments.What is the bond's modified duration?

The Seaside Inn has bonds outstanding with a par value of $1,000 each and a 4.30 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 5.0 percent?

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?

You own a 6.5 percent,semiannual coupon bond that matures in 12 years.The par value is $1,000 and the current yield to maturity is 6.4 percent.What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 25 basis points?

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 $1,000 par value bond is currently valued at $1,050.The bond pays interest semi-annually,has 9 years to maturity,and has a yield to maturity of 7.72 percent.The coupon rate is percent and the current yield is percent.

Quiz 10: Bond Prices and Yields

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 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 zero-coupon bond has a par value of $1,000 and matures in 6.5 years.The yield to maturity is 5.5 percent.What is the Macaulay duration?

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 bond has a Macaulay duration of 4.5,a yield to maturity of 5.1 percent,a coupon rate of 6.0 percent,and semiannual interest payments.What is the bond's modified duration?

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 bond has a dollar value of an 01 of 0.0748.What is the yield value of a 32nd?

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?

The outstanding bonds of Alpha Extracts have a yield to maturity of 7.4 percent and a modified duration of 11.8.If the yield to maturity instantly decreased to 6.8 percent,the bond's price would increase/decrease by ________ percent.

Two bonds have a coupon rate of 4.25 percent,semi-annual payments,face values of $1,000,and yields to maturity of 5.1 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 bond pays semiannual interest payments of $38.25.What is the coupon rate if the par value is $1,000?

Hallmark's Furniture Outlet is issuing 15-year,7.5 percent callable bonds.These bonds are callable in 5 years with a call premium of $37.50.The bonds are being issued at par and pay interest semi-annually.What is the yield to call?

A bond has a dollar value of an 01 of 0.0710.What is the yield value of a 32nd?

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 bond has a Macaulay duration of 4.5,a yield to maturity of 5.1 percent,a coupon rate of 6.0 percent,and semiannual interest payments.What is the bond's modified duration?

The Seaside Inn has bonds outstanding with a par value of $1,000 each and a 4.30 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 5.0 percent?

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?

You own a 6.5 percent,semiannual coupon bond that matures in 12 years.The par value is $1,000 and the current yield to maturity is 6.4 percent.What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 25 basis points?

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 $1,000 par value bond is currently valued at $1,050.The bond pays interest semi-annually,has 9 years to maturity,and has a yield to maturity of 7.72 percent.The coupon rate is ________ percent and the current yield is ________ percent.

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 bond has a dollar value of an 01 of 0.0748.What is the yield value of a 32^nd?

A bond has a dollar value of an 01 of 0.0710.What is the yield value of a 32^nd?

A $1,000 par value bond is currently valued at $1,050.The bond pays interest semi-annually,has 9 years to maturity,and has a yield to maturity of 7.72 percent.The coupon rate is percent and the current yield is percent.