Quiz for FINA 4400 - Financial Markets and Institutions with Ren at North Texas (UNT)

Quiz Information

Material Type:Quiz
Class:FINA 4400 - Financial Markets and Institutions
University:University of North Texas
  • Coupon Rate
  • Financial System
  • Expected Rate
  • Financial Institutions
  • Institutions
  • Required Rate
  • Capital Markets
  • Ceteris Paribus
  • Sensitivity
  • Weighted Average
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Sample Document Text

FINA 4400 Additional Examples: Chapter 3 1. If interest rates increase, the value of a fixed income contract decreases and vice versa. TRUE 2. At equilibrium a security's required rate of return will be less than its expected rate of return. FALSE 3. The duration of a four year maturity 10% coupon bond is less than four years. TRUE 4. The longer the time to maturity the lower the security's price sensitivity to an interest rate change, ceteris paribus. FALSE 5. A zero coupon bond has a duration equal to its maturity and convexity equal to zero. TRUE 6. Duration is A. the elasticity of a security's value to small coupon changes. B. the weighted average time to maturity of the bond's cash flows C. the time until the investor recovers the price of the bond in today's dollars D. greater than maturity for deep discount bonds and less than maturity for premium bonds E. the second derivative of the bond price formula with respect to the ytm. 7. You would want to purchase a security if P _____ PV or Err _____ rrr. A....

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