# duration and convexity

A bond is trading at a price of 100 with a yield of 8%. If the yield increases by 1 basis point. the price of the bond will decrease to 99.95. If the yield decreases by 1 basis point. the price of the bond will increase to 100.04. What is the modified duration of the bond? a) 5.0

b) -5.0

c) 4.5

d) -4.5

Example 1-6: FRl\1 Exam 1998--Question 22

What is the price impact of a 10-basis-point increase in yield on a 10-year par bond with a modified duration of 7 and convexity of 50? a) -0.705

b) -0.700

c) -0.698

d) -0.690

Example 1-8: FRl\1 Exam 1998--Question 20

Coupon curve duration is a useful method for estimating duration from market prices of a mortgage-backed security (MBS). Assume the coupon curve of prices for Ginnie Maes in June 2001 is as follows: 6% at 92. 7% at 94. and 8% at 96.5. What is the estimated duration of the 7s? a) 2.45

b) 2.40

c) 2.33

d) 2.25

Example 1-9: FRl\'1 Exam 1998--Question 21

Coupon curve duration is a useful method for estimating convexity from market prices of an MBS. Assume the coupon curve of prices for Ginnie Maes in June 2001 is as follows: 6% at 92. 7% at 94. and 8% at 96.5. What is the estimated convexity of the 7s? a) 53

b)26

c) 13

d) -53

Example 1-10: FRM Exam 2001-Question 71

Calculate the modified duration of a bond with a Macauley duration of 13.083 years. Assume market interest rates are 11.5% and the coupon on the bond is paid semiannually. a) 13.083

b) 12.732

c) 12.459

d) 12.371

Example I-II: FRl\'1 Exam 2002-Question 118

A Treasury bond has a coupon rate of 6% per annum (the coupons are paid semiannually) and a semiannually compounded yield of 4% per annum. The bond matures in 18 months and the next coupon will be paid 6 months from now. Which number is closest to the bond's Macaulay duration? a) 1.023 years

b) 1.457 years

c) 1.500 years

d) 2.915 years

Example 1-12: FRM Exam 1998-Question 29

A and B are two...

Please join StudyMode to read the full document