Question 1 (2 points)

Focus

The components of interest rate risk are price risk and maturity risk.

Question 1 options:

Question 2 (2 points)

A bond portfolio is immunized from interest rate risk if the modified duration of the portfolio is always equal to the desired investment horizon.

Question 2 options:

Question 3 (2 points)

There can be only one zero-beta portfolio.

Question 3 options:

Question 4 (2 points)

The bond management strategy intended to eliminate interest rate risk is immunization.

Question 4 options:

Question 5 (2 points)

Studies have shown the beta is more stable for portfolios than for individual securities.

Question 5 options:

Question 6 (2 points)

In a ladder strategy, which of the following is correct? Select one.

Question 6 options:

Question 7 (2 points)

The fact that tests have shown the CAPM intercept to be greater than the RFR is consistent with which of the following? Select one.

Question 7 options:

Question 8 (2 points)

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

Exhibit 13.13: Consider two bonds, both pay annual interest. Bond Y has a coupon of 6% per year, maturity of five years, yield to maturity of 6% per year, and a face value of $1000. Bond X has a coupon of 7% per year, maturity of 10 years, yield to maturity of 4% per year, and a face value of $1000.

Refer to Exhibit 13.13. Assume that your investment horizon is five years, and your portfolio consists only of Bond Y and Bond X. Indicate the proportions invested in each bond, so that the portfolio is immunized.

Question 8 options:

Question 9 (2 points)

Coupon reinvestment risk arises because the yield to maturity computation implicitly assumes that all coupon flows will be reinvested at the _______. Select one.

Question 9 options:

Question 10 (2 points)

Which factors indicate that in-depth credit analysis of high-yield bonds is important? Select one.

Question 10 options: