- "A". The fifteen year zero coupon is a pure duration play.
- "B". First determine the yield change. Then multiply the change by the duration. Finally, multiply the existing bond price by the complement of the price change. The price will increase by this percentage as the yield decreased.
- "A". Assets are recorded at historical cost.
- "B". Multiply the difference in yield by duration. Because the yield increases, the percentage price change is negative.
- "D". Because of the greater possibility of default risk and uneven cash flows, many analysts adopt a quasi-equity approach to valuation which may be further refined to take into account the unique attributes of the industry.
- "C". The analyst should rely on no one particular model to arrive at a company's valuation, an often subjective process. Dividend discount models can be both static and dynamic.
- "D". All of these statements describe the cost of capital.
- "C". The perpetuity valuation model may be used to appraise preferreds and real estate. V=E/R where the value=earnings or cash flow divided by the cost of capital.
- "A". Divide the yield change into the price change.
- "B". The risk-free rate is the rate on t-bills.
- "C". These statements define duration and give examples of its application.
MarketsFind out how this measure can help fixed-income investors manage their portfolios.
Financial AdvisorFinancial advisors and their clients should then focus on a bond fund’s portfolio rather than relying on any single metric like duration.
Managing WealthWhile recent market volatility is leading investors to look for the nearest exit, here are some suggestions for bond exposure in attractive sectors.
MarketsDuration tells investors the length of time it will take a bond's cash flows to repay the investor the price he or she paid for the bond. A bond's duration is stated as a number of years and ...
ETFs & Mutual FundsDuration measures a fixed-income’s sensitivity to changes in interest rates.
InvestingBig-money investors can hedge against bond portfolio losses caused by rate fluctuations.
InvestingDon't be overwhelmed by the many valuation techniques out there - knowing a few characteristics about a company will help you pick the best one.
Managing WealthWe look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
InvestingThe weighted average term to maturity of the cash flows from a bond.
ETFs & Mutual FundsExplore long-term bond mutual funds to avoid in 2016, and learn how rising rates may affect some of the best performing bond funds of the last five years.