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Test On Fixed Income For CFA Level 1

20 Questions  I  By Daulatguru
CFA Quizzes & Trivia
There are 20 questions in this test from the Fixed Income section of the CFA Level 1 syllabus. You will get 30 minutes to complete the test.

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1.  Which of the following is true about a bond with a deferred call provision?
A.
B.
C.
2.  All other things being equal, which one of the following bonds has the greatest volatility?
A.
B.
C.
3.  What is the worst-case profitability scenario for an investor who sold a call on the firm's stock for a premium of $10 and a strike price of $100?
A.
B.
C.
4.  One of the most commonly used yield spread measures is the nominal spread. Which of the following is least likely a limitation of nominal spread? The nominal spread assumes:
A.
B.
C.
5.  Suppose an investor buys one share of stock and a put option on the stock. What will be the value of her investment on the final exercise date if the stock price is below the exercise price?
A.
B.
C.
6.  Which of the following statement is least accurate?
A.
B.
C.
7.  Which of the following statement is incorrect ?
A.
B.
C.
8.  An FRA settles in 30 days:- • $1 million notional • Based on 90-day LIBOR • Forward rate of 6% • Actual 90-day LIBOR at settlement is 6.5% Calculate the PV of the FRA
A.
B.
C.
9.  Suppose that a corporate bond and a government bond have equivalent characteristics. They both have a coupon rate of 10% paid annually and have two years remaining to maturity. Assuming a flat government term structure of 15% which of the following is a possible price of the corporate bond?
A.
B.
C.
10.  A firm has just issued $1,000 face value bonds with a coupon rate of 8%, paid semi-annually, and a maturity of 15 years. If the issue price for this bond is $785.50, what is the yield-to-maturity, stated annually?
A.
B.
C.
11.  When computing the yield to maturity, the implicit reinvestment assumption is that the interest payments are reinvested at the:
A.
B.
C.
12.  Consider a $1,000 par value bond with a 7% annual coupon. The bond pays interest annually. There are 2 years remaining until maturity. What is the current yield on the bond assuming that the required return on the bond is 10%? Use simple compounding.
A.
B.
C.
13.  Ghanshyam group’s economics department has forecast that interest rates are going to change by 70 basis points. Vijay, a fixed-coupon bond portfolio manager with asset value of $120.00 million at Ghanshyam Group, forecasts that the portfolio’s value will increase by $2.2 million if interest rates fall and will decrease by $2.0 million if interest rates rise. Which of the following choices is closest to the portfolio’s effective duration?
A.
B.
C.
14.  What bond type does the following price-yield curve represent and at which yield level is convexity equal to zero?
A.
B.
C.
15.  Which of the following five year bonds has the lowest interest rate sensitivity?
A.
B.
C.
16.  A zero-coupon bond with a maturity of 10 years has an annual effective yield of 10%. What is the closest value for its modified duration?
A.
B.
C.
17.  With any other factors remaining unchanged, which of the following statements regarding bonds is not valid?
A.
B.
C.
18.  A newly issued 8% bond that pays semiannual coupons has principal value of $1,000 with a bond life of 1 year and a yield of 6% per year. The Macaulay Duration of the bond is 0.9809 and convexity is 1.3780. If the yield changes from 6% to 6.5%, then the statement that best describes the actual bond price change is:
A.
B.
C.
19.  Of the following bonds, which one will suffer the largest proportional price increase after a decrease in interest rates of 10 basis points? Assume the annual yield is 7%.
A.
B.
C.
20.  A 10-year, 8% coupon bond currently sells for $90. A 10-year, 4% coupon bond current 1 sells for $80. What is the 10-year zero rate?
A.
B.
C.
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