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QUESTION: 106 Exam Topic: 2 Volume B

Modified duration of a bond measures:

The change in value of a bond when yields increase by 1 basis point.
The percentage change in a bond price when yields increase by 1 basis point.
The present value of the future cash flows of a bond calculated at a yield equal to 1%.
The percentage change in a bond price when the yields change by 1%.

Answer(s): D

QUESTION: 107 Exam Topic: 2 Volume B

James Johnson bought a coupon bond yielding 4.7% for $1,000. Assuming that the price drops to $976 when yield increases to 4.71%, what is the PVBP of the bond.

$26.
$76.
$870.
$976.

Answer(s): A

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QUESTION: 108 Exam Topic: 2 Volume B

Which of the following risk measures are based on the underlying assumption that interest rates across all maturities change by exactly the same amount?

I) Present value of a basis point.
II) Yield volatility.
III) Macaulay's duration.
IV) Modified duration.

I and II
I, II, and III
I, III, and IV
I, II, III, and IV

Answer(s): C

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QUESTION: 109 Exam Topic: 2 Volume B

John owns a bond portfolio worth $2 million with duration of 10.
What positions must he take to hedge this portfolio against a small parallel shifts in the term structure.