Examen 1. Etapa 2 Fixed Income

In a floating-rate note (FRN), the quoted margin is most accurately defined as:

If, after the issuance of an FRN, the issuer’s credit risk increases such that the required discount margin exceeds the quoted margin, the FRN will most likely trade:

A spot rate is most accurately defined as:

The annual spot rates are: 1-year, 3.0%; 2-year, 4.0%. The 1-year forward rate 1 year from now (1y1y) is approximately:

If the spot rate curve is upward-sloping (rising), the implied forward rates will most likely be:

An investor buys a bond and their investment horizon coincides exactly with the bond’s Macaulay duration. Facing a single, immediate change in rates, the investor is most likely:

An investor buys a 12-year bond with a 5.8% annual coupon and plans to sell it in 10 years. The Macaulay duration is 8.97 years. If rates fall 75 bps immediately after purchase, the investor faces:

The duration gap of a bond is most accurately defined as:

A bond has a Macaulay duration of 8.00 and a yield-to-maturity of 6% annually with semiannual payments. Its modified duration is approximately:

Holding all else constant, which bond will most likely have the greatest duration?

A bond position has a market value of $10,000,000 and a modified duration of 6.5. Given a rate increase of 50 bps, the estimated change in the value of the position (money duration) is approximately:

A bond trades at 98.50 (per 100 of par) with a modified duration of 7.2. The price value of a basis point (PVBP) per 100 of par is approximately:

For two bonds with the same modified duration but different convexity, given a large move in rates the bond with GREATER convexity most likely:

A bond trades at 104.60 with an approximate modified duration of 8.5 and an approximate convexity of 47.6. If the yield rises from 6.3% to 7.1%, the estimated price (using duration and convexity) is approximately:

Holding all else constant, the convexity of an option-free bond is most likely greater when the bond has:

The most appropriate interest rate risk measure for a bond with embedded options (e.g., callable) is most likely:

Key rate duration is most accurately used to measure:

A callable bond trades at 100.00. If the reference curve rises 25 bps, the price falls to 98.30; if it falls 25 bps, the price rises to 101.40. The effective duration is approximately:

A portfolio has 60% in a bond with duration 4.0 and 40% in another with duration 9.0 (market-value weights). The portfolio duration is approximately:

Compared with a fixed-coupon bond from the same issuer and maturity, a floating-rate note most likely has: