FI 1.3 Test

• A. 101.58.
• B. 105.01.
• C. 105.82.

In the context of commercial mortgage-backed securities (CMBS) which of the following mechanisms is most likelya structural call protection?

• A. Prepayment lockouts
• B. Yield maintenance charges
• C. Sequential-pay tranches

A manufacturing company receives a ratings upgrade and the price increases on its fixed-rate bond. The price increase was most likely caused by a(n):

• A. decrease in the bond’s credit spread.
• B. increase in the bond’s liquidity spread.
• C. increase of the bond’s underlying benchmark rate.

A synthetic collateralized debt obligation is a CDO backed by a portfolio of:

• A. leveraged bank loans.
• B. residential or commercial mortgage-backed securities.
• C. credit default swaps.

An investor sells a bond at the quoted price of $98.00. In addition, she receives accrued interest of $4.40. The flat price of the bond is equal to the:

• A. par value plus accrued interest.
• B. agreed-on bond price excluding accrued interest.
• C. accrued interest plus the agreed-on bond price.

A bond is currently trading for 98.722 per 100 of par value. If the bond’s yield-to-maturity (YTM) rises by 10 basis points, the bond’s full price is expected to fall to 98.669. If the bond’s YTM decreases by 10 basis points, the bond’s full price is expected to increase to 98.782. The bond’s approximate convexity is closest to:

• A. 0.071.
• B. 70.906.
• C. 1,144.628.

Principal payments associated with credit card receivable-backed securities are:

• A. distributed to investors as a balloon payment.
• B. reinvested after the lockout period.
• C. distributed to investors after the lockout period.

Credit yield spreads most likely widen in response to:

• A. high demand for bonds.

• B. weak performance of equities.

• C. strengthening economic conditions.

Which of the following best describes the cash flow that owners of credit card receivable asset-backed securities receive during the lockout period?

• A. No cash flow
• B. Only principal payments collected
• C. Only finance charges collected and fees

• A. 9.00%.

• B. 9.92%.

• C. 11.93%