Exam 16: Managing Bond Portfolios

If a bond portfolio manager believes I) in market efficiency, he or she is likely to be a passive portfolio manager. II) that he or she can accurately predict interest-rate changes, he or she is likely to be an active portfolio manager. III) that he or she can identify bond-market anomalies, he or she is likely to be a passive portfolio manager.

The duration of a bond normally increases with an increase in

A 6%, 30-year corporate bond was recently being priced to yield 8%.The Macaulay duration for the bond is 8.4 years.Given this information, the bond's modified duration would be

An 8%, 15-year bond has a yield to maturity of 10% and duration of 8.05 years.If the market yield changes by 25 basis points, how much change will there be in the bond's price?

The duration of a perpetuity with a yield of 6% is

Ceteris paribus, the duration of a bond is negatively correlated with the bond's

Which of the following two bonds is more price sensitive to changes in interest rates? 1) A par-value bond, A, with a 12 year to maturity and a 12% coupon rate. 2) A zero-coupon bond, B, with a 12 year to maturity and a 12% yield to maturity.

The interest-rate risk of a bond is

The "modified duration" used by practitioners is equal to the Macaulay duration