Q&A Hero

Q: You have a portfolio which is comprised of 48 percent of stock A and 52 percent of stock B. What is the standard deviation of this portfolio?A. 1.98 percentB. 2.06 percentC. 2.13 percentD. 2.27 percentE. 2.30 percent

Q: You have a portfolio which is comprised of 20 percent of stock A and 80 percent of stock B. What is the portfolio standard deviation? A. 4.00 percent B. 5.56 percent C. 6.07 percent D. 6.82 percent E. 7.47 percent

Q: Roger has a portfolio comprised of $8,000 of stock A and $12,000 of stock B. What is the standard deviation of this portfolio?A. 4.67 percentB. 9.97 percentC. 7.23 percentD. 8.83 percentE. 10.42 percent

Q: You have a portfolio which is comprised of 35 percent of stock A and 65 percent of stock B. What is the standard deviation of this portfolio?A. 4.39 percentB. 5.68 percentC. 6.41 percentD. 7.14 percentE. 9.08 percent

Q: You have a portfolio which is comprised of 44 percent of stock A and 56 percent of stock B. What is the variance of this portfolio?A. 57.86B. 61.05C. 66.84D. 70.15E. 75.93

Q: You have a portfolio which is comprised of 72 percent of stock A and 28 percent of stock B. What is the variance of this portfolio?A. 190.9B. 203.8C. 268.1D. 290.9E. 306.9

Q: You have a portfolio which is comprised of 75 percent of stock A and 25 percent of stock B. What is the expected rate of return on this portfolio?A. 10.70 percentB. 10.87 percentC. 11.13 percentD. 12.11 percentE. 12.80 percent

Q: You have a portfolio which is comprised of 55 percent of stock A and 45 percent of stock B. What is the expected rate of return on this portfolio? A. 9.67 percent B. 9.88 percent C. 10.03 percent D. 11.79 percent E. 12.40 percent

Q: You have a portfolio which is comprised of 65 percent of stock A and 35 percent of stock B. What is the expected rate of return on this portfolio?A. 5.45 percentB. 6.62 percentC. 7.14 percentD. 7.60 percentE. 8.22 percent

Q: You have a portfolio which is comprised of 60 percent of stock A and 40 percent of stock B. What is the expected rate of return on this portfolio?A. 12.76 percentB. 12.88 percentC. 13.44 percentD. 13.56 percentE. 13.85 percent

Q: Alicia has a portfolio consisting of two stocks, X and Y, which is valued at $89,100. Stock X is worth $57,800. What is the portfolio weight of stock Y? A. .351 B. .390 C. .523 D. .610 E. .649

Q: Travis has a portfolio consisting of two stocks, A and B, which is valued at $53,800. Stock A is worth $23,900. What is the portfolio weight of stock B? A. .528 B. .543 C. .549 D. .551 E. .556

Q: A portfolio consists of the following securities. What is the portfolio weight of stock X?A. .183B. .202C. .219D. .246E. .285

Q: A portfolio consists of the following securities. What is the portfolio weight of stock B?A. .226B. .239C. .245D. .251E. .257

Q: What is the standard deviation of a security which has the following expected returns?A. 7.48 percentB. 7.61 percentC. 7.67 percentD. 7.82 percentE. 7.91 percent

Q: What is the standard deviation of the returns on this stock?A. 223.94 percentB. 24.08 percentC. 24.17 percentD. 25.72 percentE. 26.90 percent

Q: What is the standard deviation of the returns on this stock?A. 3.33 percentB. 4.62 percentC. 5.01 percentD. 5.77 percentE. 6.06 percent

Q: What is the variance of the returns on a security given the following information?A. 48.18B. 56.23C. 64.38D. 72.87E. 91.35

Q: Identify and briefly explain four of Malkiel's five theorems.

Q: Josh is saving money to purchase a home in 9 years. Explain why Josh should create a coupon bond portfolio with a duration of 9 years, rather than purchasing coupon bonds that mature in 9 years.

Q: Explain the conditions under which an investor should place more reliance on the yield-to-call than on the yield-to-maturity.

Q: A bond has a dollar value of an 01 of .0684. What is the yield value of a 32nd?A. .4408B. .4569C. .4629D. .4847E. .5084

Q: 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? A. $0.0977 B. $0.0963 C. $0.1028 D. $0.9372 E. $0.9767

Q: 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. $0.0698 B. $0.0700 C. $0.5917 D. $0.6401 E. $0.7023

Q: The outstanding bonds of Alpha Extracts have a yield to maturity of 8.4 percent and a modified duration of 10.8. If the yield to maturity instantly decreased to 7.5 percent, the bond's price would increase/decrease by _____ percent. A. -10.08 B. -9.67 C. 8.45 D. 9.72 E. 10.08

Q: 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. -0.46 B. -0.54 C. -4.60 D. -5.42 E. -6.18

Q: 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. 5.4829; 1.35B. 5.4966; 1.32C. 5.4966; 1.37D. 5.3073; 1.33E. 5.3073; 1.38

Q: A bond has a Macaulay duration of 5.5, a yield to maturity of 6.1 percent, a coupon rate of 7.0 percent, and semiannual interest payments. What is the bond's modified duration?A. 4.59 yearsB. 5.34 yearsC. 5.92 yearsD. 6.06 yearsE. 6.26 years

Q: 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. 3.39 yearsB. 3.76 yearsC. 3.92 yearsD. 4.04 yearsE. 4.16 years

Q: 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?A. -2.23 percentB. -2.43 percentC. -3.30 percentD. -3.38 percentE. -3.46 percent

Q: A zero-coupon bond has a par value of $1,000 and matures in 4.5 years. The yield to maturity is 6.4 percent. What is the Macaulay duration? A. 3.67 years B. 3.81 years C. 3.92 years D. 4.26 years E. 4.50 years

Q: 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. 1.18 yearsB. 1.65 yearsC. 1.88 yearsD. 2.03 yearsE. 2.19 years

Q: 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. 4.33 percentB. 4.68 percentC. 4.91 percentD. 5.17 percentE. 5.26 percent

Q: You own a 6.5 percent, semiannual coupon bond that matures in 7 years. The par value is $1,000 and the current yield to maturity is 6.8 percent. What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 75 basis points?A. -4.05 percentB. -4.19 percentC. -4.24 percentD. -4.31 percentE. -4.47 percent

Q: One year ago, you purchased a $1,000 face value bond at a yield to maturity of 9.45 percent. The bond has a 9 percent coupon and pays interest semiannually. When you purchased the bond, it had 12 years left until maturity. You are selling the bond today when the yield to maturity is 8.20 percent. What is your realized yield on this bond?A. 14.54 percentB. 15.27 percentC. 16.35 percentD. 17.60 percentE. 18.11 percent

Q: Alex purchased a $1,000 par value bond one year ago at a price of $1,016. At the time of purchase, the bond had 12 years to maturity and a 5 percent, semiannual coupon. Today, the bond has a yield to maturity of 5.25 percent. What is his realized yield as of today?A. 0.43 percentB. 0.86 percentC. 1.19 percentD. 1.32 percentE. 2.60 percent

Q: Ferrous Metals has bonds outstanding which it is calling today under the make-whole call provision. The bonds mature in 6 years, have a 10 percent coupon, pay interest semiannually, and have a par value of $1,000. What is today's call price given that the applicable discount rate is 7.20 percent?A. $879.12B. $968.35C. $1,015.55D. $1,134.49E. $1,172.71

Q: Will owns a bond with a make-whole call provision. The bond matures in 13 years but is being called today. The coupon rate is 8.25 percent with interest paid semiannually. What is the current call price if the applicable discount rate is 7.75 percent and the make-whole call provision applies?A. $932.84B. $957.11C. $1,040.51D. $1,110.28E. $1,128.66

Q: Blue Water Homes has 8 percent bonds outstanding that mature in 13 years. The bonds pay interest semiannually. These bonds have a par value of $1,000 and are callable in 2 years at a premium of $75. What is the yield to call if the current price is equal to 103.25 percent of par?A. 7.51 percentB. 7.70 percentC. 8.06 percentD. 8.98 percentE. 9.66 percent

Q: Cochran's Furniture Outlet is issuing 25-year, 9 percent callable bonds. These bonds are callable in 4 years with a call premium of $45. The bonds are being issued at par and pay interest semi-annually. What is the yield to call?A. 9.94 percentB. 10.72 percentC. 11.00 percentD. 11.47 percentE. 12.08 percent

Q: Ted owns a bond which is callable in 2.5 years. The bond has a 6 percent coupon, pays interest semiannually, has a par value of $1,000, and has a yield to call of 6.3 percent. What is the call premium if the bond currently sells for $1,044.54?A. $50B. $60C. $70D. $75E. $80

Q: You own a bond that pays semiannual interest payments of $38. The bond is callable in 2 years at a premium of $76. What is the callable bond price if the yield to call is 7.9 percent?A. $995.46B. $1,016.86C. $1,059.64D. $1,124.87E. $1,220.87

Q: Green Roofing Materials has 7.5 percent bonds outstanding that are currently priced at $1,068 each. The bonds pay interest on December 1 and June 1. What is the dirty price of this bond if today's date is May 1? Assume a 360-day year. A. $1,099.25 B. $1,105.75 C. $1,112.00 D. $1,118.25 E. $1,124.50

Q: You are buying a bond at a quoted price of $892. The bond has a 7.5 percent coupon and pays interest semiannually on February 1 and August 1. What is the dirty price of this bond if today is April 1? Assume a 360-day year. A. $896.17 B. $904.50 C. $913.67 D. $938.50 E. $942.00

Q: You want to buy a bond that has a quoted price of $923. The bond pays interest semiannually on April 1 and October 1. The coupon rate is 6 percent. What is the clean price of this bond if today's date is June 1? Assume a 360-day year. A. $927.62 B. $923.00 C. $923.23 D. $936.85 E. $1,076.83

Q: Two bonds have a coupon rate of 6.5 percent, semi-annual payments, face values of $1,000, and yields to maturity of 7.1 percent. Bond S matures in 6 years and bond L matures in 12 years. What is the difference in the current prices of these bonds?A. $15.26B. $16.19C. $17.40D. $18.38E. $19.02

Q: You are considering two bonds. Both have semi-annual, 8 percent coupons, $1,000 face values, and yields to maturity of 7.5 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. $10.51B. $11.33C. $11.52D. $12.67E. $12.88

Q: Alaskan Motors has outstanding bonds that mature in 13 years and pay $34.50 every 6 months in interest. The par value is $1,000 per bond and the market value is $990. The coupon rate is _____ percent, the current yield is _____ percent, and the yield to maturity is _____ percent.A. 6.90; 6.57; 6.67B. 6.90; 6.73; 6.71C. 6.90; 6.97; 7.02D. 7.00; 7.37; 7.07E. 7.00; 7.67; 7.21

Q: A bond has a $1,000 par value, semiannual interest payments of $40, and a current market value of $1,054. The bonds mature in 12.5 years. The coupon rate is _____ percent, the current yield is _____ percent, and the yield to maturity is _____ percent.A. 8.00; 7.67; 7.72B. 8.00; 7.72; 7.64C. 8.00; 7.59; 7.33D. 8.50; 7.87; 7.73E. 8.50; 8.12; 8.19

Q: The outstanding bonds of International Plastics mature in 6 years and pay semiannual interest payments of $33.50 on a $1,000 face value bond. The bonds are currently selling for $1,008.64. The coupon rate is _____ percent, the current yield is _____ percent, and the yield to maturity is _____ percent.A. 6.70; 6.64; 6.52B. 6.70; 6.78; 6.57C. 6.64; 6.83; 6.57D. 6.55; 6.86; 6.60E. 6.55; 6.91; 6.75

Q: A $1,000 face value bond is selling for $1,016.36. The bond pays interest semiannually and has 3.5 years to maturity. The yield to maturity is 5.48 percent. The current yield is _____ percent and the coupon rate is _____ percent.A. 5.86; 5.90B. 5.90; 6.00C. 5.90; 5.86D. 6.00; 5.90E. 6.00; 5.86

Q: A $1,000 par value bond is currently valued at $1,037.84. The bond pays interest semi-annually, has 7 years to maturity, and has a yield to maturity of 7.3 percent. The coupon rate is _____ percent and the current yield is _____ percent.A. 6.80; 7.21B. 8.00; 7.71C. 8.00; 7.81D. 8.50; 8.22E. 8.50; 8.30

Q: An 8.5 percent coupon bond pays interest semiannually and has 10.5 years to maturity. The bond has a face value of $1,000 and a market value of $878.50. What is the yield to maturity?A. 5.16 percentB. 8.37 percentC. 8.78 percentD. 10.43 percentE. 11.21 percent

Q: A $1,000 semiannual coupon bond matures in 15 years, has a coupon rate of 7.5 percent, and a market price of $982. What is the yield to maturity?A. 3.86 percentB. 4.01 percentC. 4.08 percentD. 7.53 percentE. 7.70 percent

Q: A $1,000 par value 5 percent Treasury bond pays interest semiannually and matures in 7.5 years. What is the yield to maturity if the bond is currently quoted at a price of 112.34?A. 3.14 percentB. 3.18 percentC. 3.23 percentD. 6.28 percentE. 6.36 percent

Q: A $1,000 face value bond matures in 11 years, pays interest semiannually, and has a 6.5 percent coupon. The bond currently sells for $1,025. What is the yield to maturity?A. 6.17 percentB. 6.18 percentC. 6.28 percentD. 6.34 percentE. 6.37 percent

Q: Last year, BT Motors issued 10-year bonds with a 9 percent coupon and semi-annual interest payments. What is the market price of a $1,000 bond if the yield to maturity is 8.9 percent?A. $1,003.97B. $1,006.53C. $1,042.89D. $1,414.14E. $1,585.36

Q: The Country Inn has bonds outstanding with a par value of $1,000 each and a 6.6 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 6.8 percent?A. $988.40B. $1,003.29C. $1,005.88D. $1,008.36E. $1,009.47

Q: A bond has 8 years to maturity, a 7 percent coupon, a $1,000 face value, and pays interest semiannually. What is the bond's current price if the yield to maturity is 6.91 percent?A. $799.32B. $848.16C. $917.92D. $1,005.46E. $1,009.73

Q: A 5.5 percent coupon bond has a face value of $1,000 and a current yield of 5.64 percent. What is the current market price? A. $975.18 B. $989.18 C. $1,011.82 D. $3,933.43 E. $4,067.47

Q: A bond has a par value of $1,000, a market price of $1,012, and a coupon rate of 5.75 percent. What is the current yield? A. 5.68 percent B. 5.71 percent C. 5.75 percent D. 5.78 percent E. 5.80 percent

Q: A bond has a par value of $1,000 and a coupon rate of 6.5 percent. What is the dollar amount of each semiannual interest payment if you own 8 of these bonds? A. $180 B. $260 C. $320 D. $420 E. $840

Q: A bond has a face value of $1,000 and a coupon rate of 5.5 percent. What is your annual interest payment if you own 8 of these bonds? A. $110 B. $220 C. $330 D. $440 E. $880

Q: A bond pays semiannual interest payments of $42.50. What is the coupon rate if the par value is $1,000? A. 5.75 percent B. 6.50 percent C. 7.80 percent D. 8.50 percent E. 9.38 percent

Q: Dynamic immunization is primarily aimed at reducing which one of the following risks? A. default B. liquidity C. reinvestment D. inflation E. taxation

Q: Last year, you created an immunized portfolio with an average maturity date of 14.5 years, a yield-to-maturity of 9.8 percent, and a duration of 9.6 years. According to the policy of dynamic immunization, you should now modify your portfolio in which one of the following ways? A. modify the yield-to-maturity to 9.1 percent B. modify the portfolio so the average maturity remains at 14.5 years C. modify the portfolio so the average maturity becomes 13.5 years D. modify the portfolio so the duration remains at 9.6 years E. modify the portfolio so the duration becomes 8.6 years

Q: To immunize your portfolio, you should: A. avoid callable bonds. B. match bond maturity dates to your target dates. C. match bond durations to your target dates. D. purchase only par value bonds. E. purchase only high-coupon bonds.

Q: The modified duration: A. is equal to the Macaulay duration divided by (1 + Yield to maturity). B. multiplied by (-1 Change in the yield to maturity) equals the approximate percentage change in a bond's price. C. will be the same for any bonds that have equal times to maturity. D. only applies to pure discount securities. E. must be converted to a Macaulay duration before computing the percentage change in a bond's price.

Q: Which one of the following statements is correct concerning Macaulay duration? A. The duration of a zero coupon bond is equal to the time to maturity. B. Most bonds have durations in excess of 15 years. C. The duration of a coupon bond is a linear function between the time to maturity and the duration. D. The duration of a coupon bond is greater than that of a zero coupon bond given equal maturity dates. E. The percentage change in a bond's price is approximately equal to the change in the yield to maturity multiplied by (-1 Macaulay duration).

Q: All else constant, which of the following will decrease the Macaulay duration of a straight bond? I. reducing the coupon payment II. shortening the time to maturity III. lowering the yield to maturity A. I only B. II only C. II and III only D. I and II only E. I and III only

Q: Which one of the following must be equal for two bonds if they are to have similar changes in their prices given a relatively small change in bond yields? A. coupon payment B. time to maturity C. market price D. duration E. current yield

Q: Which one of the following statements is correct according to Malkiel's Theorems?A. For a given change in a bond's yield to maturity, the shorter the term to maturity, the greater will be the magnitude of the change in the bond's price.B. The price of an outstanding bond is unaffected by changes in market interest rates.C. The size of the change in a bond's price increases at a constant rate given even incremental increases in a bond's yield-to-maturity even as the term to maturity lengthens.D. For a given change in a bond's yield-to-maturity, the absolute magnitude of the resulting change in the bond's price is directly related to the bond's coupon rate.E. For a given absolute change in a bond's yield-to-maturity, a decrease in yield will cause a greater change in the bond's price than will an increase in yield.

Q: How does the size of the change in a bond's price react in response to a given change in the yield to maturity as the time to maturity increases? A. decreases at an increasing rate B. decreases at a diminishing rate C. increases at a constant rate D. increases at a diminishing rate E. increases at an increasing rate

Q: Which combination of bond characteristics causes a bond to be most sensitive to changes in market interest rates? I. low coupon rates II. high coupon rates III. short time to maturity IV. long time to maturity A. III only B. I and III only C. I and IV only D. II and III only E. II and IV only

Q: According to Malkiel's theorems, bond prices and bond yields are: A. inversely related. B. uncorrelated. C. positively related. D. directly related. E. independent of each other.

Q: Which one of the following statements is correct? A. Investors know the rate of return they will earn with certainty provided they hold bonds until they mature. B. Reinvestment risk causes realized yields to differ from promised yields. C. Realized yields generally equal promised yields as long as a bond is not called. D. Redeeming a bond early helps ensure an investor earns the promised yield. E. Realized yields cannot exceed promised yields.

Q: Which one of the following statements is correct concerning a callable bond that is currently selling below face value? Assume there is no risk of default. Also assume the issuer only calls bonds when they can be refinanced at a lower rate of interest. A. The bond will most likely be called while the bonds are selling at a discount. B. The yield-to-maturity is presently more relevant to an investor than the yield-to-call. C. The bond is likely going to be called due to the low current interest rates. D. The bond is currently paying a premium. E. The bond issue will most likely be replaced with a new bond issue.

Q: Which one of the following increases the probability that a bond will be called?A. The call premium is relatively high.B. The bond is within the call protection period.C. The bond was issued within the past year.D. Market interest rates decline.E. The bond is selling at par.

Q: The yield-to-maturity assumes which one of the following? A. The bond is purchased at par value. B. All interest payments earn the latest rate of market interest. C. The bond is called on the earliest possible date. D. The bond is a pure discount bond. E. All coupon payments are reinvested at the yield-to-maturity rate.

Q: A bond pays interest semiannually on February 1 and August 1. Assume today is October 1. How many months of accrued interest are included in the clean price of this bond? A. zero B. two C. three D. four E. five