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A bond is trading at a premium if its
Price is greater than its par value.
Yield is greater than its coupon rate.
Redemption value is greater than its face value.

Which of the following fixed income securities is classified as a money market security?
Newly issued security that will mature in one year.
Security issued six months ago that will mature in one year.
Security issued 18 months ago that will mature in six months.

An analyst observes a 5-year, 10% coupon bond with semiannual payments. The face value is £1,000. How much is each coupon payment?
£25.
£100.
£50.

A bond’s indenture least likely specifies the:
Covenants that apply to the issuer.
Identity of the lender.
Source of funds for repayment.

Which of the following contains the overall rights of the bondholders?
Covenant.
Rights offering.
Indenture.

Which of the following bond covenants is considered negative?
Payment of taxes.
No additional debt.
Maintenance of collateral.

Securitized bonds are most likely to be issued by:
Banking institutions.
Special purpose entities.
Supranational entities.

Which of the following is a general problem associated with external credit enhancements? External credit enhancements:
Are subject to the credit risk of the third-party guarantor.
Are very long-term agreements and are therefore relatively expensive.
Are only available on a short-term basis.

Which of the following entities play a critical role in the ability to create a securitized bond with a higher credit rating than the corporation?
Special purpose vehicles.
Rating agencies.
Investment banks.

To reduce the cost of long-term borrowing, a corporation with a below average credit rating could:
Issue securitized bonds.
Decrease credit enhancement.
Issue commercial paper.

The coupon rate of a fixed income security is stated as 90-day LIBOR plus 125 basis points. This security is most accurately described as a(n):
variable-rate note.
reference-rate note.
floating-rate note.

Which company has higher business risk : Company A that operates in the steel industry and company B that operates in FMCG industry?
Cannot be determined
Both have same risk
Company B
Company A
Not Attempted

Which of the following is against the best practices of corporate governance ?
Majority of the Board shall comprise Promoter Directors
Various sub-committees of the Board shall have majority of its members, if not all, as independent directors
The elections for the Board should be in staggered manner and a proportion of the total Board shall retire every year
Boards shall meet independently outside the presence of the management
Not Attempted

Which of the following statements with regard to floating rate notes that has caps and floors is most accurate?
A floor is a disadvantage to both the issuer and the bondholder while a cap is an advantage to both the issuer and the bondholder.
A cap is an advantage to the bondholder while a floor is an advantage to the issuer.
A cap is a disadvantage to the bondholder while a floor is a disadvantage to the issuer.

Which of the following statements regarding a sinking fund provision is most accurate?
It requires that the issuer set aside money based on a predefined schedule to accumulate the cash to retire the bonds at maturity.
It permits the issuer to retire more than the stipulated amount if they choose.
It requires that the issuer retire a portion of the principal through a series of principal payments over the life of the bond.

Which of the following statements about U.S. Treasury Inflation Protection Securities (TIPS) is most accurate?
Adjustments to principal values are made annually.
The coupon rate is fixed for the life of the issue.
The inflation-adjusted principal value cannot be less than par.

A bond has a par value of $5,000 and a coupon rate of 8.5% payable semi-annually. The bond is currently trading at 112.16. What is the dollar amount of the semi-annual coupon payment?
$212.50.
$238.33.
$425.00.

The indenture of a callable bond states that the bond may be called on the first business day of any month after the first call date. The call option embedded in this bond is a(n):
American style call option.
European style call option.
Bermuda style call option.

As compared to an equivalent non-callable bond, a callable bond’s yield should be:
Higher.
The same.
Lower.

Fixed income classifications by geography most likely include:
Supranational bonds.
Municipal bonds.
Emerging market bonds.

The reference rate for a floating-rate note should least likely match the note’s:
Maturity.
Currency.
Reset frequency.

A purchase of a new bond issue by a single investor is most accurately described as a(n):
Underwritten offering.
Private placement.
Grey market transaction.

Settlement for a government bond trade most often occurs on the:
Same day as the trade.
Third trading day after the trade.
Next trading day after the trade.

The principal value of a sovereign bond is $1,000 at issuance and $1,055 two years after issuance. This bond most likely:
Trades at a premium.
Is indexed for inflation.
Has been upgraded.

Which of the following is a difference between an on-the-run and an off-the-run issue? An on-the-run issue:
Is publicly traded whereas an off-the-run issue is not.
Is the most recently issued security of that type.
Tends to sell at a lower price.

Two entities are in same business and the operating cycle for two entities is identical. The suppliers to both the entities remain the same monopoly player and has fixed credit terms. Entity A is situated near to raw material supply and market and enjoys higher inventory turnover as compared to Entity B. Based on above information, which of the following will be most accurate?
Entity A is better than Entity B
No conclusion can be drawn
Entity B has better collection management team than Entity A
Entity B is better than Entity A
Not Attempted

A high funding cost determinant is in the nature of ?
technical and negative basis
a fundamental with negaive basis
a technical with positive basis
a fundamental with positive basis
Not Attempted

After a change in term structure, MD values will have to be immunized which process is called
Rebalancing
Flattening
Immunization
Steepening
Not Attempted

On November 15, 20X1, Grinell Construction Company decided to issue bonds to help finance the acquisition of new construction equipment. They issued bonds totaling $10,000,000 with a 6% coupon rate due June 15, 20X9. Grinell has agreed to pay the entire amount borrowed in one lump sum payment at the maturity date. Grinell is not required to make any principal payments prior to maturity. What type of bond structure has Grinell issued?
Term maturity structure.
Serial maturity structure.
Amortizing maturity structure.

Which of the following sources of short-term funding is available to banks but typically unavailable to other corporations?
Central bank funds.
Commercial paper.
Syndicated loans.

A repurchase agreement is described as a reverse repoif:
The repurchase price is lower than the sale price.
Collateral is delivered to the lender and returned to the borrower.
A bond dealer is the lender.

A bond with a 12% coupon, 10 years to maturity and selling at 88 percent of par has a yield to maturity of:
Over 14%.
Between 13% and 14%.
Between 10% and 12%.

A zero-coupon bond matures three years from today, has a par value of $1,000 and a yield to maturity of 8.5% (assuming semi-annual compounding). What is the current value of this issue?
$78.29.
$779.01.
$782.91.

What value would an investor place on a 20-year, 10% annual coupon bond, if the investor required an 11% rate of return?
$879.
$1,035
$920.

What is the present value of a 7% semiannual-pay bond with a $1,000 face value and 20 years to maturity if similar bonds are now yielding 8.25%?
$878.56.
$879.52.
$1,000.00

What value would an investor place on a 20-year, $1,000 face value, 10% annual coupon bond, if the investor required a 9% rate of return?
$920.
$879.
$1,091

An investor plans to buy a 10-year, $1,000 par value, 8% semiannual coupon bond. If the yield to maturity of the bond is 9%, the bond’s value is:
$1,067.95.
$935.82.
$934.96.

A bond with a face value of $1,000 pays a semi-annual coupon of $60. It has 15 years to maturity and a yield to maturity of 16% per year. What is the value of the bond?
$697.71.
$832.88.
$774.84.

What is the present value of a three-year security that pays a fixed annual coupon of 6% using a discount rate of 7%?
97.38.
92.48.
100.00.

Assume a city issues a $5 million bond to build a hockey rink. The bond pays 8% semiannual interest and will mature in 10 years. Current interest rates are 6%. What is the present value of this bond?
$5,000,000.
$3,363,478.
$5,743,874.

Consider a bond that pays an annual coupon of 5% and that has three years remaining until maturity. Assume the term structure of interest rates is flat at 6%. If the term structure of interest rates does not change over the next twelve-month interval, the bond's price change (as a percentage of par) will be closest to:
0.84.
-0.84.
0.00.

An investor buys a 20-year, 10% semi-annual bond for $900. She wants to sell the bond in 6 years when she estimates yields will be 10%. What is the estimate of the future price?
$1,079.
$946.
$1,000.

Which of the following statements regarding zero-coupon bonds and spot interest rates is most accurate?
Price appreciation creates only some of the zero-coupon bond's return.
Spot interest rates will never vary across time.
A coupon bond can be viewed as a collection of zero-coupon bonds.

The price and yield on a bond have:
An inverse relationship.
A positive relationship.
No relationship.

A 5-year bond with a 10% coupon has a present yield to maturity of 8%. If interest rates remain constant one year from now, the price of the bond will be:
The same.
Lower.
Higher.

A year ago a company issued a bond with a face value of $1,000 with an 8% coupon. Now the prevailing market yield is 10%. What happens to the bond? The bond:
Is traded at a market price of less than $1,000.
Is traded at a market price higher than $1,000.
Price is not affected by the change in market yield, and will continue to trade at $1,000.

If interest rates and risk factors remain constant over the remainder of a coupon bond's life, and the bond is trading at a discount today, it will have a:
Negative current yield and a capital gain.
Positive current yield and a capital gain.
Positive current yield, only.

A 10-year spot rate is least likely the:
\yield-to-maturity on a 10-year zero-coupon bond.
yield-to-maturity on a 10-year coupon bond.
Appropriate discount rate on the year 10 cash flow for a 20-year bond.

Assume that a callable bond's call period starts two years from now with a call price of $102.50. Also assume that the bond pays an annual coupon of 6% and the term structure is flat at 5.5%. Which of the following is the price of the bond assuming that it is called on the first call date?
$100.00.
$102.50.
$103.17.

Assume a bond's quoted price is 105.22 and the accrued interest is $3.54. The bond has a par value of $100. What is the bond's clean price?
$103.54.
$108.76.
$105.22.

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