a. A 6% coupon bond paying interest annually has a modified duration of 10 years, sells for $800, and is priced at a yield to maturity of 8%. If the YTM increases to 9%, what is the predicted change in price using the duration concept?

b. A 6% coupon bond with semiannual coupons has a convexity (in years) of 120, sells for 80% of par, and is priced at a yield to maturity of 8%. If the YTM increases to 9.5%, what is the predicted contribution to the percentage change in price due to convexity?

c. A bond with annual coupon payments has a coupon rate of 8%, yield to maturity of 10%, and Macaulay duration of 9 years. What is the bond’s modified duration?

d. When interest rates decline, the duration of a 30-year bond selling at a premium:

i. Increases.

ii. Decreases.

iii. Remains the same.

iv. Increases at first, then declines.

e. If a bond manager swaps a bond for one that is identical in terms of coupon rate, maturity, and credit quality but offers a higher yield to maturity, the swap is:

i. A substitution swap.

ii. An interest rate anticipation swap.

iii. A tax swap.

iv. An intermarket spread swap.

f. Which bond has the longest duration?

i. 8-year maturity, 6% coupon.

ii. 8-year maturity, 11% coupon.

iii. 15-year maturity, 6% coupon.

iv. 15-year maturity, 11% coupon.