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18. Which of the following bonds has the greatest interest rate
price risk?
1) A 10-year $100 annuity.
2) All 10-year bonds have the same price risk since they have the same
maturity.
3) A 10-year, $1,000 face value, zero coupon bond.
4) A 10-year, $1,000 face value, 10% coupon bond with annual interest
payments.
5) A 10-year, $1,000 face value, 10% coupon bond with semiannual
interest payments
19. Which of the following statements is CORRECT?
A time line is not meaningful unless all cash flows occur annually.
Time lines are not useful for visualizing complex problems prior to
doing actual calculations.
Time lines can be constructed to deal with situations where some of the
cash flows occur annually but others occur quarterly.
Time lines can only be constructed for annuities where the payments
occur at the end of the periods, i.e., for ordinary annuities.
Time lines cannot be constructed where some of the payments
constitute an annuity but others are unequal and thus are not part of the
annuity.
20. Which of the following statements is CORRECT?