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NEW QUESTION: 1
A bond pays semi-annual coupons at an annual rate of 10%, and will mature in a year. What is its modified duration? Assume the yield curve is flat for the next 12 months at 5%.
A. 0.700
B. 1.000
C. 0.953
D. 1.500
Answer: C
Explanation:
Explanation
We can calculate the duration of the bond as follows:
PV of 1st coupon payment: $5/(1 + 5%/2) = $4.878
PV of final payment: $105/(1 + 5%) = $100
Weighted average of the two = (0.5*$4.878 + 1*$100)/($4.878 + $100) = 0.9767, ie this is the Macaulay duration.
Thus the modified duration is 0.9767/(1 + 5%/2) = 0.9529
(Note that Modified Duration = Macaulay Duration/(1 + y/n), where n is the compounding frequency) In addition to this calculation, in this particular question we can intuitively arrive at the correct answer by eliminating the incorrect choices. Since the bond matures in a year, its modified duration will be less than a year. Therefore Choice 'a' and Choice 'b' cannot be correct. Similarly, 0.700 appears too low as the coupons are not so heavily weighted towards earlier in the year. Therefore only Choice 'c' can be the correct answer.
NEW QUESTION: 2
A client wishes to establish a Document Management System (DMS) for handling a large volume of standard documents to be scanned. The client wants to enable search capabilities for certain information on the documents. Which of the following is the MOST appropriate solution?
A. Form recognition and entire document search
B. Zonal OCR and entire document search
C. Form recognition and index search
D. Zonal OCR and index search
Answer: D
NEW QUESTION: 3
Hiltson Hotels is a global group of hotels. The parent company, Hiltson Holdings plc employs an internal audit function which carries out audits and investigations on the individual hotels in the group.
Which of the following could the internal audit function carry out and still operate effectively?
A. Identification of risks at the proposed Nairobi Hiltson, which is due to open in nine months' time
B. Secondment to the accounts department of the Singapore Hiltson to cover the maternity leave of the financial controller
C. Secondment to the finance department of the Edinburgh Hiltson
D. Special investigation into the profits of the New York Hiltson where the group directors suspect a fraud may have been carried out
Answer: D