MCQ Quiz

Question 1 of 14

If $(1+Z_3)^3 = (1+Z_2)^2 \times (1+IFR_{2,1})$, which rearrangement correctly solves for $IFR_{2,1}$?

$IFR_{2,1} = \dfrac{(1+Z_3)^3}{(1+Z_2)^2} - 1$
$IFR_{2,1} = (1+Z_3)^3 - (1+Z_2)^2$
$IFR_{2,1} = \dfrac{1+Z_2}{1+Z_3} - 1$

Question 2 of 14

If spot rates are flat across maturities, the formula relationships in the CFA Curriculum imply that forward rates and par rates are most likely:

Equal to the spot rates
Always above the spot rates
Always below the spot rates

Question 3 of 14

If the price of a bond equals 100 and its coupon payment per 100 of par also equals the yield-to-maturity per 100 of par, the bond is most accurately described as trading at:

Par
A discount
A premium

Question 4 of 14

If the coupon payment that solves the par-rate equation is $PMT = 2.607$ per 100 of par value, the par rate per period is closest to:

2.607%
0.02607%
26.07%

Question 5 of 14

Which expression most accurately prices a bond using one-year forward rates?

$PV = \dfrac{CF_1}{1+f_1} + \dfrac{CF_2}{(1+f_1)(1+f_2)} + \cdots + \dfrac{CF_N}{(1+f_1)(1+f_2)\cdots(1+f_N)}$
$PV = \dfrac{CF_1+CF_2+\cdots+CF_N}{1+f_N}$
$PV = CF_1(1+f_1) + CF_2(1+f_2)$

Question 6 of 14

Which formula most accurately gives the implied forward rate from spot rates in the CFA Curriculum?

$(1+Z_A)^A \times (1+IFR_{A,B-A})^{B-A} = (1+Z_B)^B$
$(1+Z_A)^B \times (1+IFR_{A,B-A})^A = (1+Z_B)^{B-A}$
$Z_A + IFR_{A,B-A} = Z_B$

Question 7 of 14

Which formula most accurately gives a bond's price using a sequence of spot rates?

$PV = \dfrac{PMT}{(1+Z_1)^1} + \dfrac{PMT}{(1+Z_2)^2} + \cdots + \dfrac{PMT+FV}{(1+Z_N)^N}$
$PV = \dfrac{PMT+FV}{(1+Z_1)^1} + \dfrac{PMT}{(1+Z_1)^2}$
$PV = \dfrac{PMT}{1+Z_N} + \dfrac{FV}{1+Z_N}$

Question 8 of 14

A three-year bond has annual coupon $PMT = 5$, face value $FV = 100$, and spot rates $Z_1 = 2\%$, $Z_2 = 3\%$, and $Z_3 = 4\%$. Its price is closest to:

102.96
100.00
104.50

Question 9 of 14

Using annual compounding, if $Z_2 = 1.5\%$ and $Z_3 = 2.0\%$, the implied one-year forward rate two years from now is closest to:

3.01%
2.00%
0.50%

Question 10 of 14

Using forward rates $0y1y = 1.5\%$, $1y1y = 2.5\%$, and $2y1y = 3.5\%$, the price of a three-year 2% coupon bond with par value 100 is closest to:

98.619
100.000
102.500

Question 11 of 14

If the one-year forward rates are $0y1y = 1.88\%$ and $1y1y = 2.77\%$, the two-year spot rate is closest to:

2.324%
4.650%
1.880%

Question 12 of 14

Which equation is the CFA Curriculum pricing relation used to solve for a par-rate coupon payment $PMT$ on a bond priced at par?

$100 = \dfrac{PMT}{(1+z_1)^1} + \dfrac{PMT}{(1+z_2)^2} + \cdots + \dfrac{PMT+100}{(1+z_N)^N}$
$PV = \dfrac{PMT}{(1+r)^1} + \dfrac{PMT+100}{(1+r)^N}$
$100 = PMT + 100$

Question 13 of 14

Using annual compounding, if $(1+0.03)^3(1+IFR_{3,2})^2 = (1+0.04)^5$, the implied two-year forward rate in three years is closest to:

5.52%
4.00%
1.00%

Question 14 of 14

Which formula most accurately gives a three-year spot rate from one-year forward rates $0y1y$, $1y1y$, and $2y1y$?

$(1+Z_3)^3 = (1+0y1y)(1+1y1y)(1+2y1y)$
$Z_3 = 0y1y + 1y1y + 2y1y$
$(1+Z_3) = (1+0y1y)(1+1y1y)(1+2y1y)$

The Term Structure of Interest Rates (Formula)

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea

First Principles Thinking: core idea