An asset manager just bought a coupon paying bond with principal value $100,000 for $87,000 with a current yield of 4.7%. He assumes that if the yields change to 5.7% the price of the bond would be $84,500. Based on this assumption what is the modified duration of the bond?
Answer(s): D
Which one of the following statements describes Macauley's duration?
Answer(s): B
James manages a loans portfolio. He has to evaluate a large number of loans to choose which of them he will keep in the bank's books. Which one of the following four loans would he be most likely to sell to another bank?
Answer(s): C
Rising TED spread is typically a sign of increase in what type of risk among large banks?I) Credit riskII) Market riskIII) Liquidity riskIV) Operational risk
Answer(s): A
A multinational bank just bought two bonds each worth $10,000. One of the bonds pays a fixed interest of 5% semi-annually and the other pays LIBOR semi-annually. The six month LIBOR is at 5% currently. The risk manager of the bank is concerned about the sensitivity to interest rates. Which of the following statements are true?
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