Trading Jobs Fixed Income Trading

Question 1

What is the relationship between bond prices and interest rates?

Accepted Answer

They move in opposite directions

Answer

They move in the same direction

Answer

They are unrelated

Answer

They move together only for long-term bonds

Question 2

What is 'yield to maturity' (YTM)?

Accepted Answer

The total return anticipated if held until maturity

Answer

The coupon rate stated on the bond

Answer

The current yield based on market price

Answer

The yield on a comparable Treasury bond

Question 3

What is 'duration' as used in fixed income trading?

Accepted Answer

A measure of a bond's price sensitivity to interest rate changes

Answer

The maturity date of a bond

Answer

The time between coupon payments

Answer

The length of the bond's call period

Question 4

Which type of US Treasury security has the shortest maturity?

Accepted Answer

Treasury bills

Answer

Treasury bonds

Answer

Treasury notes

Answer

Treasury STRIPS

Question 5

What does it mean when a bond is trading 'at a discount'?

Accepted Answer

Its price is below its face (par) value

Answer

Its coupon rate is below the current market rate

Answer

It has been downgraded by a rating agency

Answer

Its yield is below the risk-free rate

Question 6

What is a 'spread' in the context of fixed income trading?

Accepted Answer

The yield difference between a bond and a benchmark Treasury

Answer

The difference between bid and ask prices

Answer

The gap between coupon payment dates

Answer

The margin charged by a broker on bond trades