Quiz Ch 11 – Bank’s Equity Risk and Duration Mismatch
Essentials of Investments
Bodie, Kane, and Marcus
12th Edition
When does a bank face market value of equity risk due to a duration mismatch between assets and liabilities?
When does a bank face market value of equity risk due to a duration mismatch between assets and liabilities?
In what ways can utilizing certainty-equivalent cash flows be advantageous?
Under what circumstances will the realized rate of return surpass the promised yield for a bond with a 4-year duration held over a 6-year investment horizon?
How does a bond’s duration change with variations in yield to maturity, assuming all other factors remain constant?
How is the realized rate of return affected by changes in interest rates when holding a bond with a 10-year duration for an investment horizon of 6 years?
How does bond convexity impact the price change difference between yield decreases and yield increases of equal magnitude?
How does price sensitivity respond to rising interest rates with bonds above par?
When seeking to achieve the maximum possible reduction in overall portfolio risk, which type of stocks should be included in the portfolio?
How do companies exposed to the business cycle typically relate to market risk?
What was the portfolio’s value at the end of this period after 20 years, if a $1,000 investment in common stocks returned an average of 11% in nominal terms and 4% in real terms?