MCQ Quiz

Question 1 of 21

For a level-payment fully amortizing loan, the interest part of each payment most likely:

increases over time.
decreases over time.
equals the full payment.

Question 2 of 21

When interest rates are positive, a zero-coupon bond is most likely sold:

above par.
at par.
below par.

Question 3 of 21

Compared with a fixed-coupon bond, a floating-rate note most likely exposes its investor to:

less interest rate risk.
no credit risk.
no changes in coupon payments.

Question 4 of 21

A partially amortizing bond most likely has:

no principal repayment before maturity.
all principal repaid before maturity.
a remaining balloon principal payment at maturity.

Question 5 of 21

Compared with a bullet bond, amortizing debt most likely gives investors:

more principal at maturity.
no reinvestment risk.
more cash flow earlier.

Question 6 of 21

A call provision most likely gives the right to redeem a bond early to the:

bondholder.
issuer.
bond trustee only.

Question 7 of 21

A step-up coupon bond most likely has a coupon rate that:

falls by a fixed amount on scheduled dates.
never changes.
rises by specified amounts on scheduled dates.

Question 8 of 21

At maturity, a capital-indexed bond during deflation most likely pays investors:

only the deflation-reduced principal.
the greater of inflation-adjusted principal or par.
no principal.

Question 9 of 21

An issuer most likely uses a deferred coupon bond to:

conserve cash in the early years.
repay all principal immediately.
give investors coupons earlier than usual.

Question 10 of 21

In a typical principal repayment waterfall, which investor class receives principal first?

The most senior class.
All classes equally.
The lowest-ranked class.

Question 11 of 21

Compared with an otherwise similar non-putable bond, a putable bond most likely has:

a lower price.
the same price.
a higher price.

Question 12 of 21

A sinking fund arrangement is designed primarily to:

increase principal outstanding.
retire bond principal over time.
make coupon rates float with market rates.

Question 13 of 21

A put provision most likely gives the right to sell a bond back to the issuer to the:

issuer.
bondholder.
market reference-rate administrator.

Question 14 of 21

A zero-coupon bond most likely provides its investor with:

a coupon payment every year.
no periodic coupon payments.
principal repayments every month.

Question 15 of 21

If market interest rates fall, a callable bond issuer is most likely to call the bond in order to:

refinance at a lower interest rate.
give investors a higher yield.
increase the bond's maturity.

Question 16 of 21

A bond issued simultaneously in the Eurobond market and at least one domestic bond market is most likely a:

domestic bond.
foreign bond.
global bond.

Question 17 of 21

A standard bullet bond most likely repays its principal:

at maturity.
in equal portions with every coupon.
only when market rates rise.

Question 18 of 21

The coupon rate on a floating-rate note is most likely based on:

only a fixed coupon set at issuance.
a market reference rate plus a spread.
the bond's purchase price only.

Question 19 of 21

In a fully amortizing loan, the outstanding principal most likely:

increases with every payment.
stays unchanged until maturity.
declines to zero by maturity.

Question 20 of 21

A convertible bond gives its bondholder the right to:

exchange the bond for the issuer's common shares.
change the issuer's coupon rate.
force every other investor to sell.

Question 21 of 21

An inflation-linked bond is designed primarily to help protect an investor from:

rising prices.
a bond issuer's default with certainty.
all changes in exchange rates.

Fixed-Income Cash Flows and Types (Katas)

First Principles Thinking: interest follows the balance

First Principles Thinking: discount becomes interest

First Principles Thinking: coupons adjust

First Principles Thinking: part now, remainder later

First Principles Thinking: cash arrives sooner

First Principles Thinking: who controls the call

First Principles Thinking: scheduled increase

First Principles Thinking: par protects the floor

First Principles Thinking: delay cash interest

First Principles Thinking: priority determines order

First Principles Thinking: a valuable investor right

First Principles Thinking: set funds aside to repay debt

First Principles Thinking: investor downside protection

First Principles Thinking: one final cash flow

First Principles Thinking: replace expensive debt

First Principles Thinking: two markets at once

First Principles Thinking: principal timing

First Principles Thinking: rate plus credit compensation

First Principles Thinking: repayment over time

First Principles Thinking: debt can become equity

First Principles Thinking: preserve purchasing power