Quiz Ch 11 – Convexity and Duration Predictions
Essentials of Investments
Bodie, Kane, and Marcus
12th Edition
How does convexity affect duration predictions regarding bond price changes?
How does convexity affect duration predictions regarding bond price changes?
Sort the bonds in terms of their responsiveness to fluctuations in interest rates, starting with the most reactive to the least reactive:
What is likely to increase when a firm boosts financial leverage due to higher ROA than debt costs, assuming other variables are constant?
How does Operating ROA compare to ROE in scenarios with positive tax rates and matched debt interest rates?
What type of payoff profile does combining a long stock position with selling an at-the-money call option create, similar to the payoff profile of a __________?
How do you match the stock’s payoff structure at expiration using options, lending, and borrowing?
Which options strategy is most suitable for expecting at least a 15% price movement due to a significant event like a patent hearing, with a slightly more bullish outlook than bearish?
Comparing out-of-the-money and at-the-money puts, which option results in a __________ maximum loss but __________ maximum gain?
What is required to make a binomial option price closely match the Black Scholes price?
How should you take advantage of undervalued puts through riskless arbitrage?