FI 1.12 13.03

The maturity effect is least likely to hold for a:

• A. low-coupon, long-term bond trading at a discount.
• B. zero-coupon bond.
• C. low-coupon, long-term bond trading at a premium.

All else being equal, the difference between the nominal spread and the Z-spread for a non-Treasury security will most likely be larger when the:

• A. yield curve is steep.
• B. security has a bullet maturity rather than an amortizing structure.
• C. yield curve is flat.

Q. 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:

• A. 93.07.
• B. 96.28.
• C. 96.33.

Q. A portfolio manager is considering the purchase of a bond with a 5.5% coupon rate that pays interest annually and matures in three years. If the required rate of return on the bond is 5%, the price of the bond per 100 of par value is closest to:

• A. 98.65.
• B. 101.36.
• C. 106.43.

Q. 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:

• A. 4.31%.
• B. 4.34%.
• C. 4.40%.

Q. A bond offers an annual coupon rate of 5%, with interest paid semiannually. The bond matures in seven years. At a market discount rate of 3%, the price of this bond per 100 of par value is closest to:

• A. 106.60.
• B. 112.54.
• C. 143.90.

An investor purchases a 5% coupon bond maturing in 15 years for par value. Immediately after purchase, the yield required by the market increases. The investor would then most likely have to sell the bond at:

• A. a premium.
• B. a discount.
• C. par.

Q. When underwriting new corporate bonds, matrix pricing is used to get an estimate of the:

• A. required yield spread over the benchmark rate.
• B. market discount rate of other comparable corporate bonds.
• C. yield-to-maturity on a government bond having a similar time-to-maturity.

None

• A. Bond A
• B. Bond B
• C. Bond C

Q. The yield spread of a specific bond over the standard swap rate in that currency of the same tenor is best described as the:

• A. I-spread.
• B. Z-spread.
• C. G-spread.