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Free CFA Fixed Income Practice Questions & Answers

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Question 721

A bond has a 7% coupon and a YTM of 8%. If it matures in exactly 1 year at $1,000, what is its price?

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Question 722

A floating rate bond has a reference rate of 2.5% and a quoted margin of 175 bps. If the reference rate resets and rises to 3.5%, what is the new coupon rate?

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Question 723

What is the price of a 3-year zero-coupon bond with $1,000 face value if the 3-year spot rate is 4.5%?

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Question 724

An investor buys a 2-year bond at $950 with a 5% annual coupon on $1,000 face. What is the total undiscounted cash flow?

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Question 725

A bond's Z-spread is 120 bps. If the bond is callable and its OAS is 85 bps, what does the 35 bps difference represent?

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Question 726

An upward-sloping yield curve can simultaneously be consistent with which combination of theories?

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Question 727

An investor's realized return differs from the bond's initial YTM primarily because:

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Question 728

Which of the following would cause a bond's YTM to increase?

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Question 729

A bond has a flat yield curve environment with all rates at 5%. What shape would you expect for the bond's yield curve exposure?

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Question 730

Which of the following best explains why a bond's price is the present value of its future cash flows?

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Question 731

A bond's yield to maturity is best described as:

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Question 732

An investor purchases a 2-year bond at par with a 5% coupon. Interest rates immediately rise to 7%. What happens to the bond's price?

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Question 733

Which of the following correctly states the relationship between bond maturity and price sensitivity for two otherwise identical bonds?

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Question 734

A bond's price when yields are lower is $1,050 and when yields are higher is $960. If the base yield change was 50 bps in each direction, and the base price was $1,000, what is the approximate modified duration?

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Question 735

A bond with a face value of $1,000 has an annual coupon of $80 and a current price of $1,120. What is its current yield and how does it compare to its coupon rate?

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Question 736

The implied forward rate from a flat yield curve (where all spot rates are equal) is:

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Question 737

A bond's yield-to-maturity will equal its realized return over the holding period only if:

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Question 738

Which of the following measures accounts for both the time value of money and the reinvestment of coupon cash flows when calculating yield?

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Question 739

A bond has a face value of $1,000, a 5% annual coupon, and a YTM of 5%. If it has 10 years to maturity, its price is:

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Question 740

An investor buying a bond in the secondary market pays the dirty price. The portion of the dirty price above the clean price compensates:

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Question 741

For a premium bond held to maturity, which of the following orderings of yield measures is correct?

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Question 742

A bond has a 1-year YTM of 8%. Its semi-annual equivalent YTM is:

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Question 743

If the yield curve inverts, the implied forward rates for the near term are:

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Question 744

A bond is priced at a 'discount' to par. As it approaches maturity, assuming constant yield, the bond's price will:

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Question 745

The preferred habitat theory of the term structure differs from the liquidity preference theory in that:

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Question 746

A bond with a 3% coupon trades at a yield of 5%. The bond is trading at:

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Question 747

A bond has a face value of $1,000, matures in exactly 2 years, pays 4% annually, and has a YTM of 6%. Its price is closest to:

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Question 748

Macaulay duration is best described as:

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Question 749

Modified duration is most accurately described as:

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Question 750

A higher modified duration indicates that a bond:

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Free CFA Fixed Income Practice Questions & Answers

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