101、An analyst determined that if interest rates increase 120 basis points the price of a bond would be $89.70, but if interest rates decrease 120 basis points the price of that bond would be $99.30. If the initial price of the bond is $95.40, the approximate percentage price change for a 100 basis point change in yield is closest to:

Select exactly 1 answer(s) from the following:

A. 2.5%.

B. 4.2%.

C. 8.4%.

D. 10.0%.

102、For an A- rated corporate bond that has deteriorating fundamentals, but is expected to remain investment grade, the greatest risk is most likely:

Select exactly 1 answer(s) from the following:

A. event risk.

B. default risk.

C. liquidity risk.

D. credit spread risk.

103、 Fred Perry, CFA, purchased $100,000 of a newly issued Treasury inflation protection security based on the following characteristics and information.

The coupon payment at the end of one year is closest to:

Select exactly 1 answer(s) from the following:

A. $2,000.

B. $2,100.

C. $5,000.

D. $7,000.

104、 A portfolio manager is considering investing a portion of her fixed income portfolio in a security whose cash flows are dependent on an underlying pool of mortgages. The portfolio consists of Treasury bonds, corporate bonds and Ginnie Mae passthroughs. The security being considered is Tranche B of a collateralized mortgage obligation (CMO). The underlying collateral is a Ginnie Mae passthrough security. The rules of the CMO state that Tranche A is the first to receive monthly principal. By investing in Tranche B of the CMO, the portfolio manager will most likely reduce portfolio:

Select exactly 1 answer(s) from the following:

A. credit risk.

B. inflation risk

C. sovereign risk.

D. prepayment risk.

105、Hub Global, Inc. has issued two classes of debt securities to finance its operations, a first mortgage bond and debenture bonds. All else equal, will the default and recovery rates of the debenture likely be higher than the first mortgage bond?

Select exactly 1 answer(s) from the following:

A. AnswerA.

B. AnswerB.

C. AnswerC.

D. AnswerD.

答案和详解如下：

101 Correct answer is B    

“Risks Associated With Investing in Bonds,” Frank J. Fabozzi
2008 Modular Level I, Vol. 5, pp. 269-271
Study Session 15-63-f
compute and interpret the duration and dollar duration of a bond
The formula for calculating the duration of a bond (estimated percentage price change for a 100 basis point change in yield) is:
Price if yields decline - price if yields increase / 2(initial price)(change in yield in decimal) = 99.3 - 89.7 / 2 (95.4)0.0120 = 4.19287.

102 Correct answer is D

“Risks Associated With Investing in Bonds,” Frank J. Fabozzi
2008 Modular Level I, Vol. 5, pp. 277-281
Study Session 15-63-j
describe the various forms of credit risk and describe the meaning and role of credit ratings
The bond is expected to see a widening of spreads as a result of deteriorating fundamentals and a potential downgrade but still remaining investment grade.

103 Correct answer is B

“Overview of Bond Sectors and Instruments,” Frank J. Fabozzi
2008 Modular Level I, Vol. 5, pp. 299-301
Study Session 15-64-b
describe the types of securities issued by the U.S. Department of the Treasury (e.g., bills, notes, bonds, and inflation protection securities), and differentiate between on-the-run and off-the-run Treasury securities
First adjust the principal by inflation = $100,000 x 1.05 = $105,000. Then multiply the adjusted principal by the real rate = $105,000 x 0.02 = $2,100.

104 Correct answer is D

“Overview of Bond Sectors and Instruments,” Frank J. Fabozzi
2008 Modular Level I, Vol. 5, pp. 308-312
Study Session 15-64-f
state the motivation for creating a collateralized mortgage obligation
Adding Tranche B of the CMO to the portfolio will most likely reduce prepayment. A passthrough security, such as a Ginnie Mae, can be prepaid as the underlying loans pay off principal, i.e., they are exposed to prepayment risk. On the other hand, the tranches in a CMO will be paid off sequentially, i.e., Tranche A then TrancheB. Tranche B has less prepayment risk than the underlying passthrough securities.

105 Correct answer is A

“Overview of Bond Sectors and Instruments,” Frank J. Fabozzi
2008 Modular Level I, Vol. 5, pp. 318-321
Study Session 15-64-h
describe the characteristics and motivation for the various types of debt issued by corporations (including corporate bonds, medium-term notes, structured notes, commercial paper, negotiable CDs, and bankers acceptances)
Default rates apply to the issuer and would be equal for any security issued by that issuer while the recovery of the unsecured debenture is lower than for the first mortgage bond which is secured.

3ku

good

ThanQ