# Fixed Income - Fixed Income Section 2

>>>>>>>>Fixed Income Section 2

• A

minus the amortized amount of the premium.  • B

plus the amortized amount of the premium.  • C

minus the amortized amount of the discount.  • Option : A
• Explanation : Carrying value of a bond is computed using the effective interest rate method. It is the price along the bond's constant- yield price trajectory. For premium bonds, as the premium is amortized, the book value of the bond will decrease until we reach face value at maturity. The question tells us that the bond was purchased above par, therefore it is a premium bond. So among the three options A is correct.

• A

6.36.  • B

7.36.  • C

8.36.  • A

Analyst 1.  • B

Analyst 2.  • C

Both.  • Option : C
• Explanation : Yield duration statistics measure the sensitivity of a bond’s full price to the bond’s own yield to maturity. Curve duration statistics measure the sensitivity of a bond’s full price to the benchmark yield curve.

• A

8.45 years.  • B

9.62 years.  • C

10 years.  • Option : B
• Explanation : Modified duration = (Macaulay Duration) / (1 + r) = 10 / ( 1 + ( 0.08 / 2 ) ) = 9.62 years

• Option : C
• Explanation : Modified duration = Macaulay Duration / ( 1 + r ). Therefore a bonds Macaulay duration is typically more than its modified duration.
Related Quiz.
Fixed Income Section 2