allépourpêcher Wrote: ------------------------------------------------------- > Bond yield curve question anyone? > > A yield curve undergoes a parallel shift. With > respect to the bonds described by the yield curve, > the shift has least likely changed the: > > A) > > > durations. > B) > > > yield spreads for bonds of different maturities. > C) > > > current yields. > D) > > > yield to maturities. A ?, duration is the measure of slope which did not change
c
Think about the effective duration formula for parallel shifts. If y changes, price of bond changes, which changes effective duration.
c given same liquidity and credit should have the same yield
For the people saying C for the 2nd question, when a parallel shift occurs, doesn’t that change all yields, including the current yield as well?
duration is the expression of change given a paralel shift
I think its B. Why would spreads change in a parallell shift?
I 'm not sure if it’s b or c
Isn’t current yields and YTM the same?
has to be B change of plans
^ No, curreny yield is coupon/price.
jeez, I just saw that the answer letter layout was messed up, right answer should be B or yield spreads for bonds of different maturities.
You are right, LanceTX. Thx.
current yield = coupon/current price with a change in the yield curve I would think current price changes => I wouldn’t go for C by way of elimination I will say B is the anwer
Answer for 2nd question: B. Apologies for the formatting - maybe some of you wrote C because of it. A yield curve is on a graph with interest rates on the vertical axis and maturities on the horizontal axis. A parallel shift of a yield curve means the spread between the interest rates or the “yield spreads” have not changed. The other possible choices to answer the question would change. By definition, the yields to maturity have changed. Since duration changes with changes in yield, all the durations would change. A parallel shift in the yield curve means that all yields have changed, and that would change current yields of the bonds
So we aren’t crazy then.
allépourpêcher Wrote: ------------------------------------------------------- > Tip: erase the last 9 months of credit issues from > your mind: > > Taylor explains to Johnson that there are major > differences between ABS and corporate bonds in > terms of credit risk. Which of the following is a > major difference? ABS have: > > A) > complete predictability of cash flows and no > operational risk. > B) > the same predictability of cash flows but a lower > operational risk. > C) > a greater predictability of cash flows due to the > absence of operational risk. > D) > a smaller predictability of cash flows due to the > higher operational risk. So what was the correct answere on this one?
^C