the nominal risk-free rate is best described as the sum of the real risk-free rate and a
a bank quotes a stated annual interest rate of 4.00%. if that rate is equal to an effective annual rate of 4.08%, then the bank is compounding interest
the value in six years of $75,000 invested today at a stated annual interest rate of 7% compounded quarterly is closest to
a sweepstakes winner may select either a perpetuity of $2,000 a month beginning with the first payment in one month or an immediate lump sum payment of $350,000. if the annual discount rate is 6% compounded monthly, the present value of the perpetuity is
which of the following risk premiums is most relevant in explaining the difference in yields between 30-year bonds issued by the us treasury and 30-year bonds issued by a all private issuer?
grandparents are funding a newborn's future university tuition costs, estimated at $50,000/year for four years, with the first payment due in 18 years. assuming a 6% effective annual rate, the required deposit today is closest to
given a stated annual interest rate of 6% compounded quarterly, the level amount that,deposited quarterly, will grow to $25,000 at the end of 10 years is closest to
the legal contract that describes the form of the bond, the obligations of the issuer, and the rights of the bondholders can be best described as a bond’s
which of the following is a type of external credit enhancement?
an affirmative covenant is most likely to stipulate:
which of the following best describes a negative bond covenant? the issuer is
if interest rates are expected to increase, the coupon payment structure most likely to benefit the issuer is a
which of the following provisions is a benefit to the issuer?
investors seeking some general protection against a poor economy are most likely to select a
relative to an otherwise similar option-free bond. a
the distinction between investment grade debt and non-investment grade debt is best described by
compared with developed markets bonds, emerging markets bonds most likely
in an underwritten offering, an investment bank that underwrites a bond issue most likely
in major developed bond markets, newly issued sovereign bonds are most often sold to the public via a(n)
a liquid secondary bond market allows an investor to sell a bond at
a mechani by which an issuer may be able to offer additional bonds to the general public without preparing a new and separate offering circular best describes
which of the following statements relating to commercial paper is most accurate?
for the issuer, a sinking fund arrangement is most similar to a
which of the following is a source of wholesale funds for banks?
the repo margin on a repurchase agreement is most likely to be lower when
a bond offers an annual coupon rate of 4%, with interest paid semiannually. the bond matures in two years. at a market discount rate of 6%, the price of this bond per 100 of par value is closest to
two bonds a and b both have 5 years to maturity. bond a’s coupon rate is 6% and bond b’s coupon rate is 8%. both bonds are currently trading at par value. relative to bond b, for a 200 basis points decreases in the yield, bond a will most likely exhibit a(n):
bond a is a semi-annual coupon bond with a coupon rate of 5%. it pays interest on april 10 and october 10 each year and its maturity date is oct 10, 2020. if its ytm is 4% and 30/360 day-count convention method is used, what is its full price on june 16, 2018?
the accrued interest per 100 of par value for bond a in question 4 on 16 june 2018 is closest to
the flat price for bond a in question 4 on 16 june 2018 is closest to
matrix pricing allows investors to estimate market discount rates and prices for bonds
the bond equivalent yield of a 180-day banker's acceptance quoted at a discount rate of 4.25% for a 360-day year is closest to
the 2-year and 4-year spot rates are 3.5% and 4.2%, respectively. what is the implied 2-year forward rate 2-year from now, if the rate is semi-annually compounded?
securitization benefits financial markets by
in a securitization, the special purpose entity (spe) is responsible for the
in a securitization, time tranching provides investors with the ability to choose between
if interest rates increase, an investor who owns a mortgage pass-through security is most likely affected by
the tranches in a collateralized mortgage obligation (cmo) that are most likely to provide protection for investors against both extension and contraction risk are
credit risk is an important consideration for commercial mortgage-backed securities (cmbs) because the cmbs are backed by mortgage loans that
which of the following best describes the cash flow that owners of credit card receivable asset-backed securities receive during the lockout period?
a debt security that is collateralized by a pool of the sovereign debt of several developing countries is most likely a
residential mortgages that may be included in agency rmbs are least likely required to have
support tranches are most appropriate for investors who are
which of the following sources of return is most likely exposed to interest rate risk for an investor of a fixed- rate bond who holds the bond until maturity?
which of the following is most appropriate for measuring a bond’s sensitivity to shaping risk?
the interest rate risk of a fixed-rate bond with an embedded call option is best measured by:
assuming no change in the credit risk of a bond, the presence of an embedded put option:
the risk that a bond’s creditworthiness declines is best described by:
stedart ltd and fignermo ltd are alike with respect to financial and operating characteristics, except that stedart ltd has less publicly traded debt outstanding than fignermo ltd. stedart ltd is most likely to have
in the event of default, debentures’ claims will most likely rank:
in the event of default, the recovery rate of which of the following bonds would most likely be the highest?
during bankruptcy proceedings of a firm, the priority of claims was not strictly adhered to. which of the following is the least likely explanation for this outcome?
a fixed income yst is least likely to conduct an independent ysis of credit risk because credit rating agencies:
if goodwill makes up a large percentage of a company’s total assets, this most likely indicates that:
in order to yze the collateral of a company a credit yst should assess the:
in order to determine the capacity of a company, it would be most appropriate to yze the:
a credit yst is evaluating the credit worthiness of three companies: a construction company, a travel and touri company, and a beverage company. both the construction and travel and touri companies are cyclical, whereas the beverage company is non- cyclical. the construction company has the highest debt level of the three companies. the highest credit risk is most likely exhibited by the:
the repo margin on a repurchase agreement is most likely to be higher when:
for a fully amortized bond, the annual payment, which includes both the coupon payment and the principal repayment
when interest rates are forecasted to decline, an investor will most likely prefer a
the government of ilaka, a developing country, has issued 30-year capital-indexed bonds linked to the domestic consumer price index (cpi) in local currency ia. the bonds have a par value of ia 1,000. the bonds make semi-annual coupon payments at a rate of 6%. over the most recent six months the cpi has increased by 4%. if the bonds were interest-indexed bonds as opposed to capital-indexed bonds, semi-annual coupon would have been
a waterfall structure in a securitized bond issue:
in most countries including the united states, debenture is defined as:
best effort offerings
the difference between on-the-run and off-the-run u.s. treasury securities is that on-the-run treasury securities are:
which of the following is a disadvantage to bondholders if a bond has a sinking fund provision?
contingent convertible bonds are described most accurately as those which, if a specified event occurs:
a 7% annual coupon bond is trading at a price of 105.67 and has three years to maturity. a 5.5% annual payment, 3-year t-note is trading at a price of 107.89. a 5-year 7% annual coupon t-note is trading at a price of 109.77. given the above information, the g-spread will be closest to:
which of the following is a risk faced by issuers of commercial papers?
the spread measure which accounts for future interest rate volatility is the:
three months ago, a steel manufacturer sold a 5% bond issue with a face value of £1,000 and yield of 5%. the bond will be maturing in ten months' time. the issue is most likely classified as a:
a dual currency bond:
which of the following coupon payment structures will allow investors to benefit from an increase in interest rates?
which of the following reasons indicates why an issuer prefers a make-whole provision to a standard call provision?
securitization typically:
the internal rate of return on the cash flows assuming the payments are made on the scheduled dates is referred to as:
which of the following statements is most likely correct regarding credit spreads?
callable but can be called every october 10 one year from now till maturity. the call provision is most likely a (n):
a recently issued sovereign bond for a given maturity is also referred to as:
immediately after its coupon rate is reset, a floating-rate note is priced at 98.50 percent of par. it is most likely that:
which of the following best describes the motivation for a corporation to issue securitized bonds? securitization of specific assets by a corporation enables the corporation to:
recent economic data suggest an increasing likelihood that the economy will soon enter a recessionary phase. what is the most likely effect on the yields of lower-quality corporate bonds and on credit spreads of lower-quality versus higher-quality corporate bonds:
which of the following is least likely to be a negative covenant associated with a coupon-paying corporate bond issue?
which of the following bonds is most likely to trade at a lower price relative to an otherwise identical option-free bond?
proceeds for repaying securitized bonds most likely come from the
the market value of an 18-year zero-coupon bond with a maturity value of $1,000 discounted at a 12% annual interest rate with semi-annual compounding is closest to
which of the following products provides protection from inflation?
which of the following is least likely a short-term funding method available to banks?
a two-year spot rate of 5% is most likely the
to obtain the spot yield curve, a bond yst would most likely use the most
effective duration is essential to measuring interest rate risk of a bond with an embedded call option because:
credit migration risk is best described as the risk that a bond (‘s):
the investor’s realized horizon yield matches the yield-to-maturity if:
an annual modified duration of a fixed rate bond is 5.75. although there is no change in benchmark yields but due to improved financial reporting quality and a ratings upgrade, the flat price of the bond has increased from 98.10 to 101.65 per 100 of par value. the estimated change in the credit spread of the bond is closest to:
when the investor’s investment horizon is less than the macaulay duration of the bond she owns:
which of the following accounting issues should mostly likely be considered a character warning flag in credit ysis?
in a bankruptcy proceeding, when the absolute priority of claims is enforced:
loss severity is best described as the:
the two components of credit risk are default probability and: