SIE Debt Securities and Fixed Income 2

Question 1

What does 'yield to maturity' (YTM) represent?

Accepted Answer

The total return if the bond is held until maturity

Answer

The annual coupon payment divided by par value

Answer

The bond's current price divided by par

Answer

The spread over Treasury rates

Question 2

Which US Treasury security has a maturity of more than 10 years?

Accepted Answer

Treasury bond

Answer

Treasury bill

Answer

Treasury note

Answer

Treasury STRIP

Question 3

A bond trading at a premium means its price is:

Accepted Answer

Above par value

Answer

Equal to par value

Answer

Below par value

Answer

Equal to its yield to maturity

Question 4

Municipal bonds are issued by:

Accepted Answer

State and local governments

Answer

Foreign governments

Answer

The US federal government

Answer

Federal agencies like Fannie Mae

Question 5

What is a debenture?

Accepted Answer

An unsecured bond backed only by the issuer's creditworthiness

Answer

A bond secured by specific company assets

Answer

A government-issued savings bond

Answer

A convertible preferred share

Question 6

Duration measures a bond's sensitivity to:

Accepted Answer

Changes in interest rates

Answer

Credit risk changes

Answer

Inflation risk

Answer

Reinvestment risk