Risk and Return Measures - Sample Questions 21 - 26


  1. Please select the bond with the shortest duration:
    1. 15 year debenture.
    2. 15 year zero coupon corporate bond.
    3. 20 year treasury bond.
    4. 20 year debenture.
  2. If a bond is presently trading at 934.87 with a yield of 8.12% and a duration of 9.3 and the yield falls to 7.01%, the bond's new price is:
    1. 1007.25
    2. 1031.38
    3. 989.72
    4. 1091.03
  3. With respect to book value:
    1. It is a static measure of a company's value.
    2. It may be a valid input into the determination of a company's value in liquidation.
    3. Both a. and b.
    4. None of the foregoing.
  4. A bond with a duration of 8 experiences a yield increase from 5% to 6%. Calculate the approximate percentage price change:
    1. 1% increase.
    2. 8% price decrease.
    3. 1% decrease.
    4. None of the foregoing.
  5. Regarding the valuation of high yield paper:
    1. Valuation metrics used often are applicable to equity valuation.
    2. Pricing may also be a function of the industry particulars of the company being analyzed.
    3. IRR assumes reinvestment at the yield to call.
    4. a. and b.
  6. Dividend Growth Models:
    1. Are static.
    2. Are dynamic.
    3. May be one of several tools necessary to value a company effectively.
    4. Could be applicable in the valuation of high yield securities.
Sample Questions 27 - 31


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