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- Why is bond demand curve downward slopping? Why is bond supply curve upward slopping?.As compared to an equivalent noncallable bond, should a callable bond’s yield be higher, lower or the same and why?True or False? Macaulay duration of measure of the curvature in the relationship between bond prices and bond yields.
- What is the relationship between the yield to maturity and the price of a bond? They are negatively related They are positively related There is no relation O The relation is indeterminantDo you agree with the following statement? Explain why.“The information about a bond’s duration and convexity adjustment is sufficient to quantifyinterest rate risk exposure.What is bond duration? What is bond convexity? What is the difference between the two concepts?
- Looking at the bond issue selected, why are the current yield and yield to maturity numbers different? Briefly explain in words the difference between these two terms.Explain within a small paragraph the concept of duration. Provide an example where duration is equal to the time to maturity. Furthermore, explain why for bond instruments, Macaulay duration is close to but not equal in general, to the time to maturity.why modified duration is a better measure than maturity when calculatinga bond’s sensitivity to changes in interest rates.
- When is curve duration used? O In all of the cases given. O When the yield to maturity is not a meaningful measure. O In none of the cases given. To estimate duration for bonds with embedded put options. To estimate duration for callable bonds.Which of the following statements is/are most CORRECT? O 11 A yield curve depicts the relationship between bond's 'time to maturity and its yield to maturity. 2) A premium bond's price will decline over time if the required return remains unchanged. 3) A discount bond's price will decline over time if the required return remains unchanged. 4) Both a and b are correct.With regard to interest rate sensitivity measures and bonds: Group of answer choices C. Convexity attempts to capture the sensitivity of a bond’s duration to changes in interest rates. D. Both B & C B. Duration is related to yield approximation and convexity is related to price. A. Convexity is related to yield approximation and duration is related to price