MCQ Quiz

Question 1 of 14

If a bond has two cash flows with times to receipt of 1 and 3 years and weights of 0.4 and 0.6, its Macaulay duration is closest to:

2.2 years
2.0 years
1.8 years

Question 2 of 14

If 63 days have passed in a 180-day coupon period, the time to receipt of the first coupon in periods is closest to:

0.65
0.35
1.35

Question 3 of 14

If a bond's Macaulay duration is 9.0 years and the investor's horizon is 6.5 years, the duration gap is closest to:

2.5 years
-2.5 years
15.5 years

Question 4 of 14

For the general Macaulay duration formula between coupon dates, which input is defined as the yield-to-maturity per period?

$r$
$t$
$T$

Question 5 of 14

Which expression gives Macaulay duration from a duration table once each cash flow's weight is known?

$\text{MacDur} = \sum (\text{time to receipt} \times \text{weight})$
$\text{MacDur} = \sum (\text{cash flow} \times \text{weight})$
$\text{MacDur} = \sum (\text{present value} \times \text{time to receipt})$

Question 6 of 14

If a semiannual bond's Macaulay duration is 3.6 periods, its annualized Macaulay duration is closest to:

1.8 years
3.6 years
7.2 years

Question 7 of 14

Which formula most accurately gives the realized annualized rate of return on a bond investment over a holding period of $T$ years?

$r = \left(\dfrac{FV}{PV}\right)^{1/T} - 1$
$r = \dfrac{FV - PV}{T}$
$r = \left(\dfrac{PV}{FV}\right)^{1/T} - 1$

Question 8 of 14

Which formula most accurately defines the weight of a bond cash flow in a Macaulay duration table?

$\text{Weight} = \dfrac{\text{Present value of the cash flow}}{\text{Bond full price}}$
$\text{Weight} = \dfrac{\text{Cash flow}}{\text{Bond full price}}$
$\text{Weight} = \dfrac{\text{Time to receipt}}{\text{Bond full price}}$

Question 9 of 14

Which formula matches the CFA Curriculum definition of duration gap?

$\text{Duration gap} = \text{Macaulay duration} - \text{Investment horizon}$
$\text{Duration gap} = \text{Investment horizon} - \text{Macaulay duration}$
$\text{Duration gap} = \text{Time to maturity} - \text{Investment horizon}$

Question 10 of 14

If a bond investment has $PV = 100$, ending value $FV = 121$, and holding period $T = 2$, the realized annualized return is closest to:

10.0%
21.0%
9.5%

Question 11 of 14

Between coupon dates, if 63 days have passed in a 180-day coupon period, the fraction of the coupon period that has passed, $t/T$, is closest to:

0.35
0.65
2.86

Question 12 of 14

If a bond cash flow has present value 4 and the bond full price is 100, that cash flow's Macaulay weight is closest to:

0.04
4.00
0.25

Question 13 of 14

If a bond is held to maturity and the ending value is 182.493 on an initial price of 100 over 10 years, the realized annualized return is closest to:

6.20%
8.25%
18.25%

Question 14 of 14

A bond investor has reinvested coupons worth 20 at the horizon and a sale price of 95. If the purchase price was 100 and the horizon is one year, the realized return is closest to:

15%
20%
5%

Interest Rate Risk (Katas)

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea