Duration is a measurement of a bond’s interest rate risk. It is also referred to as the responsiveness or sensitivity of a bond’s full price to a change in its yield.
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Duration is a measurement of a bond’s interest rate risk. It is also referred to as the responsiveness or sensitivity of a
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- 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 priceInterest Rate risk depends upon how sensitive the bond price is to interest rate changes (i.e., maturity and coupon rate). T/FMoney duration is the appropriate measure of interest rate risk for bonds with embedded options. Select one: True False
- ( ) is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. a.Convexity b.Maturity c.Duration d.ImmunizationExplain the differences between a bond's yield to maturity (YTM) and its yield to call (YTC). Is there a reason why the return to the investor would alter if a bond is called? Please provide justification for your response.What does duration tell you about the sensitivity of a bond portfolio to interest rates. What are the limitations of the duration measure?
- True or False? Macaulay duration of measure of the curvature in the relationship between bond prices and bond yields.Make an example of bond valuation encompassing without change in the on going interest rate, and when there is decrease and increase of on going interest rate. Cite the implication of the changes.Describe the differences between the yield to maturity (YTM) and the yield to call (YTC) on a bond. Why would the return to the investor be different if a bond is called? Justify your answer
- Identify and discuss the relations among a bond’s coupon rate, the yield required by the market, and the bond’s price relative to par value (i.e., discount, premium, or equal to par).How do bond duration and bond convexity work together to assess the interest rate risk of a bond portfolio?The difference in yield between a credit-risky bond and a credit-risk-free bond of similar maturity is called its yield spread. Select one: True False
