Question

1. Which of the following is an example of curve duration?

A. Macaulay duration.

B. Modified duration.

C. Effective duration.

2. Two statements about duration are given as follows:

Statement 1: "Duration measures the percentage change in bond price for a one basis point change in the yield."

Statement 2: "Money duration measures the price change in bond price for a one basis point change in the yield."

A. Both statements are correct.

B. Exactly one of the statement is correct.

C. None of the statements is correct.

3. Which of the following statements about Macaulay duration is CORRECT?

A. A bond's coupon rate and Macaulay duration are positively related.

B. A bond's Macaulay duration is inversely related to its yield-to-maturity.

C. The Macaulay duration of a zero-coupon bond is less than its time-to-maturity.

4. The Macaulay duration of a 6% annual coupon payment bond is 2.3 years. The yield of the bond is 5%. What is the modified duration of this bond?

A. 2.17

B. 2.19

C. 2.3

Answer 1

1]

C. Effective duration. Curve duration is the sensitivity of bond price to changes in the yield curve.

A and B are incorrect. These are examples of yield duration. Yield duration is the sensitivity of bond price to changes in the bond's yield.