Bond a Has a Duration of 5

question 37

Multiple Choice

Bond A has a duration of 5.6 while bond B has a duration of 6.0. Bond B

• A) will have greater price variability, given a change in interest rates, relative to bond A.
• B) will have a longer maturity than bond A.
• C) will have a higher coupon rate than bond A.
• D) will have less price variability, given a change in interest rates, relative to bond A.

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Definitions:

Safety Inventory

Additional stock kept beyond expected demand to protect against variability in market demand or supply chain disruptions.

Normally Distributed

Refers to a probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean.

Standard Deviation

A statistical metric that quantifies the dispersion or spread of a dataset relative to its mean, indicating consistency or variability.

Echelon Inventory

The stock held across different stages of the supply chain, considering the inventory at all levels together.