TRUSTED
100% PASS RATE
, Question 1
According to the liquidity preference theory, which of the following statements is least
accurate?
a.
All else equal, investors prefer short-term securities over long-term securities.
b.
Investors perceive little risk differential between short-term and long-term securities.
c.
Borrowers will pay a premium for long-term funds to avoid having to roll over short-
term. debt.
d.
Investors always prefer the higher liquidity of short-term bonds and any deviance from
an upward sloping yield curve is only temporary.
Question 2
Question text
Consider a 30 year, R1 000 semi-annual-pay bond with a 9% coupon and a 13.20% yield
to maturity. Based on a change in the yield to maturity of 1.20%, the effective duration of
the bond is closest to:
a.
3.84
b.
4.55
c.
7.67
d.
9.10
100% PASS RATE
, Question 1
According to the liquidity preference theory, which of the following statements is least
accurate?
a.
All else equal, investors prefer short-term securities over long-term securities.
b.
Investors perceive little risk differential between short-term and long-term securities.
c.
Borrowers will pay a premium for long-term funds to avoid having to roll over short-
term. debt.
d.
Investors always prefer the higher liquidity of short-term bonds and any deviance from
an upward sloping yield curve is only temporary.
Question 2
Question text
Consider a 30 year, R1 000 semi-annual-pay bond with a 9% coupon and a 13.20% yield
to maturity. Based on a change in the yield to maturity of 1.20%, the effective duration of
the bond is closest to:
a.
3.84
b.
4.55
c.
7.67
d.
9.10
