the economics of money, banking, and financial markets

114 #

© 2014 Pearson Canada Inc.#

5. 
   

   All else equal, when interest rates ____, the duration of a coupon bond ____.
   A) rise; falls
   B) rise; increases
   C) falls; falls
   D) falls; does not change
   Answer: A
   Diff: 2 Type: MC Page Ref: 4.1A- 3
   Topic: Questions for Web Appendix on Measuring Interest Rate Risk: Duration
   Skill: Recall
   Objective List: Appendix: Measuring Interest-Rate Risk: Duration

   
   


6. 
   

   All else equal, the ____ the coupon rate on a bond, the ____ the bond's duration.
   A) higher; longer
   B) higher; shorter
   C) lower; shorter
   D) greater; longer
   Answer: B
   Diff: 2 Type: MC Page Ref: 4.1A- 3
   Topic: Questions for Web Appendix on Measuring Interest Rate Risk: Duration
   Skill: Recall
   Objective List: Appendix: Measuring Interest-Rate Risk: Duration

   
   


7. 
   

   An asset's interest rate risk ____ as the duration of the asset ____.
   A) increases; decreases
   B) decreases; decreases
   C) decreases; increases
   D) remains constant; increases
   Answer: B
   Diff: 2 Type: MC Page Ref: 4.1A- 5
   Topic: Questions for Web Appendix on Measuring Interest Rate Risk: Duration
   Skill: Recall
   Objective List: Appendix: Measuring Interest-Rate Risk: Duration