1. Which of the following does a 2-year, zero-coupon U.S. Treasury note NOT have? A. Inflation...

 

Transcribed Image Text:

1. Which of the following does a 2-year, zero-coupon U.S. Treasury note NOT have? A. Inflation risk B. Interest rate risk C. Currency risk. D. Volatility risk. 2. A straight 5% coupon bond has 2 years remaining to maturity and is priced at $981.67 ($1000 par value). A putable bond that is the same in every respect as the straight bond except that the put provision is priced at $1,017.6 (percent of par value). With the yield curve flat at 6%, what is the value of embedded put option? A. -$35.93 B. -$17.60 C. $17.60 D. $35.93 3. Which of the following securities will have the least reinvestment risk for a long-term investor? A. A 10-year, zero-coupon bond. B. A 6-month T-bill. C. A 30-year, prepayable amortizing bond. D. A 10-year, 4% debenture. 4. Which of the following is a difference between an on-the-run and an off-the-run issue? An on-the-run issue: A. Will always carry a higher coupon B. Is the most recently issued security of that type C. Has a shorter maturity than an off-the-run issue D. Is publicly traded whereas an off-the-run issue is not. 5. Assume the following yields for different bonds issued by a corporation: 1-year bond:5.50% 2-year bond:6.00% 3-year bond:7.00% If a 3-year U.S. Treasury is yielding 5%, then what is the absolute yield spread on the 3- year corporate issue? A. 0.40 B. 1.40 C. 100bp D. 200bp 1. Which of the following does a 2-year, zero-coupon U.S. Treasury note NOT have? A. Inflation risk B. Interest rate risk C. Currency risk. D. Volatility risk. 2. A straight 5% coupon bond has 2 years remaining to maturity and is priced at $981.67 ($1000 par value). A putable bond that is the same in every respect as the straight bond except that the put provision is priced at $1,017.6 (percent of par value). With the yield curve flat at 6%, what is the value of embedded put option? A. -$35.93 B. -$17.60 C. $17.60 D. $35.93 3. Which of the following securities will have the least reinvestment risk for a long-term investor? A. A 10-year, zero-coupon bond. B. A 6-month T-bill. C. A 30-year, prepayable amortizing bond. D. A 10-year, 4% debenture. 4. Which of the following is a difference between an on-the-run and an off-the-run issue? An on-the-run issue: A. Will always carry a higher coupon B. Is the most recently issued security of that type C. Has a shorter maturity than an off-the-run issue D. Is publicly traded whereas an off-the-run issue is not. 5. Assume the following yields for different bonds issued by a corporation: 1-year bond:5.50% 2-year bond:6.00% 3-year bond:7.00% If a 3-year U.S. Treasury is yielding 5%, then what is the absolute yield spread on the 3- year corporate issue? A. 0.40 B. 1.40 C. 100bp D. 200bp

Answer rating: 100% (QA)

The detailed answer for the above question is provided below 1 The correct answer is C Currency risk ... View the full answer