2013 Practice Final Chpt 19 25
PRACTICE_FINAL EXAM
PORTFOLIO MANAGEMENT
Winter 2013
CHAPTER 19—BOND PORTFOLIO MANAGEMENT STRATEGIES
MULTIPLE CHOICE
1. Which of the following is a passive bond portfolio strategy?
a. Indexing
b. Buy-and-Hold
c. Classical immunization
d. Choices a and b
e. None of the above
ANS: D
PTS: 1
OBJ: Multiple Choice
3. Which of the following is a matched funding technique?
a. Classical immunization
b. Contingent immunization
c. Bond swaps
d. Valuation analysis
e. Interest rate anticipation
ANS: A
PTS: 1
OBJ: Multiple Choice
5. Junk bonds are high yield bond bonds rated below
a. BBB.
b. BB.
c. B.
d. CCC.
e. CC.
ANS: A
PTS: 1
OBJ: Multiple Choice
7. Which of the following would not normally be a reason for a bond swap?
a. Increasing current yield
b. Improving the quality of the portfolio
c. Taking advantage of interest rate shifts
d. Tax savings
e. Realigning the portfolio's duration
ANS: E
PTS: 1
OBJ: Multiple Choice
21. In classical immunization the effect of a change in interest rates is effectively neutralized because
a. Price risk and reinvestment risk offset each other.
b. Price risk and maturity risk offset each other.
c. Reinvestment risk and credit risk offset each other.
d. Reinvestment risk and maturity risk offset each other.
e. None of the above.
ANS: A
PTS: 1
OBJ: Multiple Choice
23. Interest rate risk is comprised of which of the following risks?
a. Price risk.
b. Coupon reinvestment risk.
c. Default risk.
d. Both a and b only.
e. All of the above.
ANS: D
PTS: 1
OBJ: Multiple Choice
25. Horizon matching is a combination of
a. Cash-matching dedication and interest rates swaps.
b. Cash-matching dedication and immunization.
c. Interest rate swaps and immunization.
d. Enhanced indexing and immunization.
e. Enhanced indexing and interest rate swaps.
ANS: B
PTS: 1
OBJ: Multiple Choice
Exhibit 19.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is given concerning a pure yield pick-up swap: You currently hold a
PORTFOLIO MANAGEMENT
Winter 2013
CHAPTER 19—BOND PORTFOLIO MANAGEMENT STRATEGIES
MULTIPLE CHOICE
1. Which of the following is a passive bond portfolio strategy?
a. Indexing
b. Buy-and-Hold
c. Classical immunization
d. Choices a and b
e. None of the above
ANS: D
PTS: 1
OBJ: Multiple Choice
3. Which of the following is a matched funding technique?
a. Classical immunization
b. Contingent immunization
c. Bond swaps
d. Valuation analysis
e. Interest rate anticipation
ANS: A
PTS: 1
OBJ: Multiple Choice
5. Junk bonds are high yield bond bonds rated below
a. BBB.
b. BB.
c. B.
d. CCC.
e. CC.
ANS: A
PTS: 1
OBJ: Multiple Choice
7. Which of the following would not normally be a reason for a bond swap?
a. Increasing current yield
b. Improving the quality of the portfolio
c. Taking advantage of interest rate shifts
d. Tax savings
e. Realigning the portfolio's duration
ANS: E
PTS: 1
OBJ: Multiple Choice
21. In classical immunization the effect of a change in interest rates is effectively neutralized because
a. Price risk and reinvestment risk offset each other.
b. Price risk and maturity risk offset each other.
c. Reinvestment risk and credit risk offset each other.
d. Reinvestment risk and maturity risk offset each other.
e. None of the above.
ANS: A
PTS: 1
OBJ: Multiple Choice
23. Interest rate risk is comprised of which of the following risks?
a. Price risk.
b. Coupon reinvestment risk.
c. Default risk.
d. Both a and b only.
e. All of the above.
ANS: D
PTS: 1
OBJ: Multiple Choice
25. Horizon matching is a combination of
a. Cash-matching dedication and interest rates swaps.
b. Cash-matching dedication and immunization.
c. Interest rate swaps and immunization.
d. Enhanced indexing and immunization.
e. Enhanced indexing and interest rate swaps.
ANS: B
PTS: 1
OBJ: Multiple Choice
Exhibit 19.5
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The following information is given concerning a pure yield pick-up swap: You currently hold a