SIE Debt Securities and Fixed Income

Question 1

What is the par value of a standard corporate bond?

Accepted Answer

$1,000

Answer

The standard par value (face value) for a corporate bond is $1,000, which is repaid at maturity.

Question 2

When interest rates rise, what happens to existing bond prices?

Accepted Answer

Bond prices fall

Answer

Bond prices and interest rates have an inverse relationship — when rates rise, existing bond prices fall.

Question 3

What is a callable bond?

Accepted Answer

A bond the issuer can redeem before maturity

Answer

A callable bond allows the issuer to redeem the bond before its stated maturity date, usually when interest rates decline.

Question 4

Which type of bond is backed by the full faith and credit of the US government?

Accepted Answer

US Treasury securities

Answer

US Treasury securities are backed by the full faith and credit of the federal government, making them the safest bonds.

Question 5

What is the coupon rate of a bond?

Accepted Answer

The annual interest rate stated on the bond at issuance

Answer

The coupon rate is the annual interest rate fixed at issuance, determining the periodic interest payments.

SIE - Securities Industry Essentials Practice Test