MCQ Quiz

Question 1 of 35

A bond equivalent yield for a money market instrument is most accurately a money market rate stated on a:

365-day add-on rate basis
360-day discount rate basis
semiannual coupon basis only

Question 2 of 35

A 120-day instrument has $FV = 100$, $PV = 99$, and a 360-day year. Its discount rate $DR$ is closest to:

3.00%
3.03%
1.00%

Question 3 of 35

Money market instruments have original maturities of most accurately:

one year or less
more than one year only
exactly ten years

Question 4 of 35

A two-year semiannual floater has $MRR = 1\%$, $QM = 0.5\%$, $FV = 100$, and $m = 2$. The periodic payment $PMT$ is closest to:

0.75
1.50
0.50

Question 5 of 35

Which expression correctly isolates the add-on rate $AOR$ from the CFA Curriculum money market formula?

$AOR = \dfrac{Year}{Days} \times \dfrac{FV - PV}{PV}$
$AOR = \dfrac{Year}{Days} \times \dfrac{FV - PV}{FV}$
$AOR = \dfrac{Days}{Year} \times \dfrac{FV - PV}{PV}$

Question 6 of 35

A 180-day instrument has $PV = 100$, $AOR = 6\%$, and a 360-day year. The maturity value $FV$ is closest to:

103.00
106.00
112.00

Question 7 of 35

If a floater has periodic discount rate $r = 0.006$, $m = 4$, and $MRR = 1.0\%$, the discount margin $DM$ is closest to:

1.4%
0.5%
2.4%

Question 8 of 35

A floating-rate instrument is most accurately described as a debt instrument with interest determined by:

an observed market reference rate plus a quoted margin
a fixed coupon rate only
its par value minus accrued interest

Question 9 of 35

If the simplified floater model uses $r = \dfrac{MRR + DM}{m}$, which rearrangement solves for the discount margin $DM$?

$DM = mr - MRR$
$DM = \dfrac{r - MRR}{m}$
$DM = MRR - mr$

Question 10 of 35

The required margin is also known as the:

discount margin
coupon reset period
bond equivalent yield

Question 11 of 35

An add-on rate most accurately involves interest that is:

added to the principal amount
subtracted from the face value
ignored until maturity

Question 12 of 35

A 90-day money market instrument has $FV = 100$, $DR = 4\%$, and a 360-day year. Its price is closest to:

99.00
96.00
101.00

Question 13 of 35

Yield measures in the money market are most accurately described as annualized and:

not compounded
compounded semiannually
always compounded monthly

Question 14 of 35

A 120-day instrument has $FV = 100$, $PV = 99$, and a 360-day year. Its add-on rate $AOR$ is closest to:

3.03%
3.00%
1.00%

Question 15 of 35

Bank certificates of deposit, repos, and market reference rates are typically quoted on an:

add-on rate basis
discount rate basis
equity dividend basis

Question 16 of 35

A 90-day instrument has $FV = 100$, $DR = 0.12\%$, and a 360-day year. Its price is closest to:

99.97
99.88
100.12

Question 17 of 35

The required margin for a floater is most analogous to which measure for a fixed-rate bond?

Yield spread
Coupon payment
Accrued interest

Question 18 of 35

Conventional money market measures can most accurately be converted to enhance:

comparability to longer-term securities
equity voting rights
coupon accrual conventions only

Question 19 of 35

Which formula is the CFA Curriculum expression for a money market discount rate $DR$?

$DR = \dfrac{Year}{Days} \times \dfrac{FV - PV}{FV}$
$DR = \dfrac{Year}{Days} \times \dfrac{FV - PV}{PV}$
$DR = \dfrac{Days}{Year} \times \dfrac{FV - PV}{FV}$

Question 20 of 35

If a floater trades at par on a reset date, the quoted margin is most likely ____ the required margin:

equal to
greater than
less than

Question 21 of 35

Which formula most accurately prices a money market instrument quoted on an add-on rate basis?

$PV = \dfrac{FV}{1 + \dfrac{Days}{Year} \times AOR}$
$PV = FV \times \left(1 - \dfrac{Days}{Year} \times AOR\right)$
$PV = \dfrac{FV}{1 + \dfrac{Year}{Days} \times AOR}$

Question 22 of 35

For a floater, the premium or discount relative to par most likely arises from the difference between the fixed quoted margin and the:

required margin
market value of equity
face value

Question 23 of 35

Compared with fixed-rate instruments, floating-rate instruments generally bear less:

price risk
credit risk
principal amount

Question 24 of 35

Most loans are most accurately classified in this module as:

floating-rate instruments
zero-coupon bonds
money market discount instruments only

Question 25 of 35

The quoted margin on a floating-rate note is most accurately the specified spread ____ the reference rate:

over or under
equal to
multiplied by

Question 26 of 35

For a floating-rate note, which formula most accurately gives the periodic payment $PMT$ in the simplified pricing model?

$PMT = \dfrac{(MRR + QM) \times FV}{m}$
$PMT = \dfrac{(MRR + DM) \times FV}{m}$
$PMT = (MRR + QM) \times FV \times m$

Question 27 of 35

The market reference rate on a floating-rate note is most likely reset on:

predetermined dates
the maturity date only
random dates chosen by investors

Question 28 of 35

Commercial paper, Treasury bills, and bankers' acceptances are typically quoted on a:

discount rate basis
add-on rate basis
full price plus accrued interest basis

Question 29 of 35

In the simplified FRN pricing model, which one-period denominator is most accurate when $MRR = 1.2\%$, $DM = 0.8\%$, and $m = 4$?

$1 + \dfrac{0.012 + 0.008}{4}$
$1 + 0.012 + 0.008$
$1 + \dfrac{0.012 - 0.008}{4}$

Question 30 of 35

On a reset date, if the quoted margin is less than the required margin, the floater will most likely be priced at a:

premium
discount
par value

Question 31 of 35

A 180-day instrument has $PV = 100$, $FV = 101$, and a 360-day year. Its add-on rate $AOR$ is closest to:

2.00%
1.00%
1.98%

Question 32 of 35

Changes in the required margin usually come from changes in the issuer's:

credit risk
coupon frequency only
par value

Question 33 of 35

A money market discount rate understates the investor's rate of return when the purchase price is ____ the face value:

below
equal to
above only because of default

Question 34 of 35

On a reset date, if the quoted margin is greater than the required margin, the floater will most likely be priced at a:

premium
discount
par value only if duration is zero

Question 35 of 35

Money market instruments with different times-to-maturity have different:

periodicities
face values by definition
coupon reset dates by definition

Yield and Yield Spread Measures for Floating-Rate Instruments (Katas)

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