Title Fixed Income - Question.pdf ✅

CFA Program Level I for February 2024 1 Fixed Income 1. If an issuer is required to retire a specified portion of the bond's principal each year, the bond most likely. A. is callable. B. is a step-up note. C. has a sinking fund provision. 2. A five-year semiannual bond has a yield to maturity of 8%. Converted to a quarterly periodicity, the yield to maturity is closest to: A. 1.98% B. 3.92% C. 7.92%. 3. The key rate duration best measures a bond's sensitivity to a change in the: A. level of the yield-to-maturity. B. slope of the yield-to-worst curve. C. shape of the benchmark yield curve. 4. A bond priced at 99.4 has a modified duration of 6.9 and an annual convexity statistic of - 212. If the market yield increases by 75 basis points, the price of this bond is closest to A. 93.7. B. 94.3. C. 94.9. 5. If interest rates rise over the holding period, the total return of a coupon bond held until maturity is most likely to be: A. less than the yield to maturity at purchase. B. equal to the yield to maturity at purchase.
CFA Program Level I for February 2024 2 C. greater than the yield to maturity at purchase. 6. A bond that allows the issuer to pay interest in the form of additional amounts of the existing bond issue rather than a cash payment best describes a A. step-up coupon bond. B. deferred coupon bond. C. payment-in-kind coupon bond. 7. In the event of default, investors in covered bonds most likely have recourse against: A. the issuer only. B. a segregated pool of assets only. C. both the issuer and a segregated pool of assets. 8. In the securitization process, the trustee most likely. A. sells the underlying collateral. B. owns the underlying collateral. C. holds the underlying collateral. 9. The coupon of a residential mortgage-backed security is the: A. pass-through rate B. weighted average coupon rate. C. rate on the underlying pool of mortgages. 10. The stated annual yield to maturity on a semiannual bond basis is 3.66%. The effective annual yield is closest to: A. 3.63% B. 3.69%
CFA Program Level I for February 2024 3 C. 7.45% 11. In a securitization, the purchase agreement between the seller of the collateral and the special purpose entity most likely provides: A. a description of the transaction structure. B. representations about the quality of the assets. C. documentation of enhancements used to reduce credit risk. 12. An analyst gathers the following information about a bond: • Price 96.00 • Price with yield to maturity 10 basis points higher 95.80 • Price with yield to maturity 10 basis points lower 96.30 The approximate convexity of this bond is closest to: A. 521. B. 1,042. C. 2,604. 13. A break-even reinvestment rate is most likely equivalent to a(n): A. par rate. B. spot rate. C. implied forward rate. 14. A bond trading at its no-arbitrage value is priced at a premium. The sum of the present value of the bond's cash flows discounted at spot rates is: A. less than the sum of the present values of the bond's cash flows discounted at its yield to maturity B. equal to the sum of the present values of the bond's cash flows discounted at its yield to maturity.