CBE CBE Financial Markets and Instruments

Question 1

Which financial market instrument represents a short-term debt obligation issued by the U.S. Treasury with a maturity of one year or less?

Accepted Answer

Treasury bill

Answer

Treasury bond

Answer

Treasury note

Answer

TIPS

Question 2

The yield curve is considered 'inverted' when:

Accepted Answer

Short-term rates are higher than long-term rates

Answer

Long-term rates are higher than short-term rates

Answer

All maturities have the same yield

Answer

The 10-year yield equals the Fed funds rate

Question 3

A bond trading at a price below its par value is said to be trading at a:

Accepted Answer

Discount

Answer

Premium

Answer

Parity

Answer

Spread

Question 4

Which of the following best describes a derivative financial instrument?

Accepted Answer

A contract whose value is derived from an underlying asset

Answer

A stock issued by a publicly traded company

Answer

A government bond with fixed interest payments

Answer

A savings account with a guaranteed return

Question 5

The primary market in finance refers to:

Accepted Answer

Where new securities are issued for the first time to raise capital

Answer

Where previously issued securities are traded between investors

Answer

The largest stock exchange by market capitalization

Answer

Markets for commodity futures contracts

Question 6

Which measure represents the sensitivity of a bond's price to changes in interest rates?

Accepted Answer

Duration

Answer

Convexity

Answer

Yield spread

Answer

Credit rating