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QUESTION 1 You own a bond that has a duration of 7 years

QUESTION 1You own a bond that has a duration of 7 years. Interest rates are currently 6% but you believe the Fed is about to increase interest rates by 100 basis points. Your predicted price change on this bond is ________.-0.7%-1.4%-2.5%-6.6%1 points QUESTION 2The bonds of ABC Company have received a rating of “A” by S&P. The “A” rating indicates the bonds are _________.low gradeintermediate gradeinvestment gradejunk bonds1 points QUESTION 3Consider the expectations theory of the term structure of interest rates. If the yield curve is downward sloping, this indicates that investors expect short-term interest rates to __________ in the future.increasedecreasenot changechange in an unpredictable manner1 points QUESTION 4What is the YTM on a bond with 10 years to maturity, 8% coupon rate, semi-annual coupon payments, and a price of $921?4.0%4.6%9.2%9.6%1 points any help will be appreciated!QUESTION 5What is the duration of a ten-year zero coupon bond with a YTM of 7%, par value of $1,000, and a AAA credit rating?2 years7 years10 yearsNone of the above1 points QUESTION 6You want to invest in a bond portfolio that you will use later to payoff a liability due in 7 years. Which of the following bond portfolios would immunize you from interest rate risk.A) Zero coupon bonds with 7 years to maturityB) A portfolio of bonds with a duration of 7 yearsC) A portfolio of bonds with an average 7 years to maturityA and BA and C1 points QUESTION 7A coupon bond pays semi-annual interest is reported as having an ask price of 97% of its $1,000 par value in the Wall Street Journal. If the last interest payment was made 3 months ago and the coupon rate is 2%, the invoice price of the bond will be _________. Choose the closest answer.$970$975$985$9901 points QUESTION 8What would most likely happen to the YTM on the sovereign bonds of a country if that county becomes riskier and may have difficulty making future payments?YTM will riseYTM not affectedYTM will fall1 points QUESTION 9What is the annual coupon payment paid in year 2 of a 10 year maturity TIPS with a par value of $1,000, annual coupon rate of 4%, and inflation of 1% in year 1, 2% in year 2 and 4% in year 3?$41$51$60$711 points QUESTION 10Everything else equal the __________ the maturity of a bond and the __________ the YTM the greater the sensitivity of the bond’s price to interest rate changes.longer; higherlonger; lowershorter; highershorter; lower

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