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Advanced Wealth Management Course (IIBF) - Paper 3

Part II: Ch 15: Duration

Q1.

(I) Modified duration is useful in immunization. (II) Macaulay’s duration is a measure of the sensitivity of a bond’s price to interest rate movements

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q2.

(I) A bond’s elasticity will always be a negative number. (II) Modified duration indicates the percentage change in the price of a bond for a given change in the yield.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q3.

(I) Duration of a coupon bearing bond is higher than its maturity. (II) The duration of a zero-coupon bond equals the bond’s maturity.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q4.

The price value of a basis point (PV01) is used extensively in buying hedge products for a portfolio.