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1) A portfolio manager is considering the purchase of a bond with a 5

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1) 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.

2. An investor who owns a bond with a 9% coupon rate that pays interest semiannually and matures in three years is considering its sale. If the required rate of return on the bond is 11%, the price of the bond per 100 of par value is closest to:

A. 95.00.

B. 95.11.

C. 105.15.

3. A zero-coupon bond matures in 15 years. At a market discount rate of 4.5% per year and assuming annual compounding, the price of the bond per 100 of par value is closest to:

A. 51.30.

B. 51.67.

C. 71.62.

4. Consider the following two bonds that pay interest annually:

Bond	Coupon Rate	Time-to-Maturity
A	5%	2 Years
B	3%	2 Years

 

At a market discount rate of 4%, the price difference between Bond A and Bond B per 100 of par value is closest to:

A. 3.70.

B. 3.77.

C. 4.00.

The following information relates to Questions 5 and 6

Bond	Price	Coupon Rate	Time-to-Maturity
A	101.886	5%	2 years
B	100.000	6%	2 years
C	97.327	5%	3 years

 

5. Which bond offers the lowest yield-to-maturity?

A. Bond A

B. Bond B

C. Bond C

6. Which bond will most likely experience the smallest percent change in price if the market discount rates for all three bonds increase by 100 basis points (bps)?

A. Bond A

B. Bond B

C. Bond C

7. Suppose a bond's price is expected to increase by 5% if its market discount rate decreases by 100 bps. If the bond's market discount rate increases by 100 bps, the bond price is most likely to change by:

A. 5%.

B. less than 5%.

C. more than 5%.

The following information relates to Questions 8–10

Bond	Coupon Rate	Time-to-Maturity	Time-to-Maturity	Spot Rates
X	8%	3 years	1 years	8%
Y	7%	3 years	2 years	9%
Z	6%	3 years	3 years	10%

 

All three bonds pay interest annually.

8. Based upon the given sequence of spot rates, the price of Bond X is closest to:

A. 95.02.

B. 95.28.

C. 97.63.

9. Based upon the given sequence of spot rates, the price of Bond Y is closest to:

A. 87.50.

B. 92.54.

C. 92.76.

10. Based upon the given sequence of spot rates, the yield-to-maturity of Bond Z is closest to:

A. 9.00%.

B. 9.92%.

C. 11.93%

11. Bond dealers most often quote the:

A. flat price.

B. full price.

C. full price plus accrued interest.

The following information relates to Questions 12–14

Bond G, described in the exhibit below, is sold for settlement on 16 June 2020.

Annual Coupon              5%

Coupon Payment Frequency                Semi-annual

Interest Payment Dates                      10 April and 10 October

Maturity Date                                     10 October 2022

Day Count Convention                         30/360

Annual Yield-to-Maturity                   4%

12. The full price that Bond G will settle at on 16 June 2020 is closest to:

A. 102.36.

B. 103.10.

C. 103.65.

13. The accrued interest per 100 of par value for Bond G on the settlement date of 16 June 2020 is closest to:

A. 0.46.

B. 0.73.

C. 0.92.

14. The flat price for Bond G on the settlement date of 16 June 2020 is closest to:

A. 102.18.

B. 103.10.

C. 104.02.

15. A bond with 20 years remaining until maturity is currently trading for 111 per 100 of par value. The bond offers a 5% coupon rate with interest paid semiannually. The bond's annual yield-to-maturity is closest to:

A. 2.09%.

B. 4.18%.

C. 4.50%.

16. The annual yield-to-maturity, stated for with a periodicity of 12, for a 4-year, zero-coupon bond priced at 75 per 100 of par value is closest to:

A. 6.25%.

B. 7.21%.

C. 7.46%.

17. A 5-year, 5% semiannual coupon payment corporate bond is priced at 104.967 per 100 of par value. The bond's yield-to-maturity, quoted on a semiannual bond basis, is 3.897%. An analyst has been asked to convert to a monthly periodicity. Under this conversion, the yield-to-maturity is closest to:

A. 3.87%.

B. 4.95%.

C. 7.67%.

The following information relates to Questions 18–20

A bond with 5 years remaining until maturity is currently trading for 101 per 100 of par value. The bond offers a 6% coupon rate with interest paid semiannually. The bond is first callable in 3 years, and is callable after that date on coupon dates according to the following schedule:

End of Year	Call Price
3	102
4	101
5	100

 

18. The bond's annual yield-to-maturity is closest to:

A. 2.88%.

B. 5.77%.

C. 5.94%.

19. The bond's annual yield-to-first-call is closest to:

A. 3.12%.

B. 6.11%.

C. 6.25%.

20. The bond's annual yield-to-second-call is closest to:

A. 2.97%.

B. 5.72%.

C. 5.94%.

21. A two-year floating-rate note pays 6-month Libor plus 80 bps. The floater is priced at 97 per 100 of par value. Current 6-month Libor is 1.00%. Assume a 30/360 day-count convention and evenly spaced periods. The discount margin for the floater in basis points is closest to:

A. 180 bps.

B. 236 bps.

C. 420 bps.

22. An analyst evaluates the following information relating to floating rate notes (FRNs) issued at par value that have 3-month Libor as a reference rate:

Floating Rate Note	Quoted Margin	Discount Margin
X	0.40%	0.32%
Y	0.45%	0.45%
Z	0.55%	0.72%

 

Based only on the information provided, the FRN that will be priced at a premium on the next reset date is:

A. FRN X.

B. FRN Y.

C. FRN Z.

23. A 365-day year bank certificate of deposit has an initial principal amount of USD 96.5 million and a redemption amount due at maturity of USD 100 million. The number of days between settlement and maturity is 350. The bond equivalent yield is closest to:

A. 3.48%.

B. 3.65%.

C. 3.78%.

24. 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%.

25. A yield curve constructed from a sequence of yields-to-maturity on zero-coupon bonds is the:

A. par curve.

B. spot curve.

C. forward curve.

The following information relates to Questions 26 and 27

Time Period	Forward Rate
“0y1y”	0.80%
“1y1y”	1.12%
“2y1y”	3.94%
“3y1y”	3.28%
“4y1y”	3.14%

 

All rates are annual rates stated for a periodicity of one (effective annual rates).

26. The 3-year implied spot rate is closest to:

A. 1.18%.

B. 1.94%.

C. 2.28%.

27. The value per 100 of par value of a two-year, 3.5% coupon bond, with interest payments paid annually, is closest to:

A. 101.58.

B. 105.01.

C. 105.82.

28. The spread component of a specific bond's yield-to-maturity is least likely impacted by changes in:

A. its tax status.

B. its quality rating.

C. inflation in its currency of denomination.

The following information relates to Question 29

Bond	Coupon Rate	Time-to-Maturity	Price
UK Government Benchmark Bond	2%	3 years	100.25
UK Corporate Bond	5%	3 years	100.65

 

Both bonds pay interest annually. The current three-year EUR interest rate swap benchmark is 2.12%.

29. The G-spread in basis points on the UK corporate bond is closest to:

A. 264 bps.

B. 285 bps.

C. 300 bps.

30. A corporate bond offers a 5% coupon rate and has exactly 3 years remaining to maturity. Interest is paid annually. The following rates are from the benchmark spot curve:

Time-to-Maturity	Spot Rate
1 year	4.86%
5 years	4.95%
3 years	5.65%

 

The bond is currently trading at a Z-spread of 234 bps. The value of the bond is closest to:

A. 92.38.

B. 98.35.

C. 106.56.