Prefinal RF – Preguntas 4

Curso: Renta Fija. Sección A. 2023-I

Profesor: Bruno Cornejo

Question 1 - 97236

Which of the following is a general problem associated with external credit enhancements? External
credit enhancements:

A) are very long-term agreements and are therefore relatively expensive.

B) are subject to the credit risk of the third-party guarantor.
C) are only available on a short-term basis.

Question 2 - 97327

Austin Traynor is considering buying a $1,000 face value, semi-annual coupon bond with a quoted
price of 104.75 and accrued interest since the last coupon of $33.50. If Traynor pays the dirty price,
how much will the seller receive at the settlement date?

A) $1,081.00.
B) $1,014.00.
C) $1,047.50.

Question 3 - 96949

A Treasury bond due in one-year has a yield of 8.5%. A Treasury bond due in 5 years has a yield of
9.3%. A bond issued by General Motors due in 5 years has a yield of 9.9%. A bond issued by
Exxon due in one year has a yield of 9.4%. The default risk premiums on the bonds issued by
Exxon and General Motors are:

Exxon General Motors

A) 0.1% 0.6%
B) 0.1% 1.4%
C) 0.9% 0.6%

Question 4 - 96987

What would the marginal tax rate have to be for an investor to be indifferent between a 6% yield on
tax exempt municipal bonds and a 10% corporate bond?

A) 60%.
B) 40%.
C) 20%.
Question 5 - 97488

A municipal bond selling at 12% above par offers a yield of 3.2%. A taxable Treasury note selling at
an 8% discount offers a yield of 4.6%. An investor in the 32.5% tax bracket wishes to purchase an
equal dollar amount of both bonds. The after-tax yield of the two-bond portfolio is closest to:

A) 4.67%.
B) 3.15%.
C) 2.63%.

Question 6 - 96837

Which of the following is least likely to be given as a reason that the prices of floating-rate bonds
fluctuate from par?

A) Call risk.
B) Coupon formulas with fixed-rate margins.
C) Cap risk.

Question 7 - 96878

U.S. Treasury securities face several risks to varying degrees. Generally speaking, rank the
following risks that an investor in a 5% coupon, 25-year, off-the-run U.S. Treasury bond, issued
after 1984, would face. Order them from left to right with the least likely risk first through the most
likely risk faced by the investor last.

 1 = liquidity risk.
 2 = prepayment risk.
 3 = default risk.
 4 = interest rate risk.

A) 2, 3, 1, 4.
B) 1, 2, 3, 4.
C) 3, 4, 2, 1.

Question 8 - 96032

When computing the yield to maturity, the implicit reinvestment assumption is that the interest
payments are reinvested at the:

A) prevailing yield to maturity at the time interest payments are received.

B) coupon rate.
C) yield to maturity at the time of the investment.

Question 9 - 95811
If interest rates fall, the:

A) value of call option embedded in the callable bond falls.

callable bond's price rises more slowly than that of a noncallable but otherwise identical
B)
bond.
C) callable bond's price rises faster than that of a noncallable but otherwise identical bond.

Question 10 - 95684

Consider an annual coupon bond with the following characteristics:

 Face value of $100

 Time to maturity of 12 years
 Coupon rate of 6.50%
 Issued at par
 Call price of 101.75 (assume the bond price will not exceed this price)

For a 75 basis point change in interest rates, the bond's duration is:

A) 8.79 years.
B) 8.17 years.
C) 5.09 years.

Question 11 - 95841

An analyst has obtained the following Treasury data for bonds currently trading at their par values:

Maturity Coupon Price

6 months 2.5% 100
1 year 3.5% 100
18 months 4.5% 100

Using the method of bootstrapping, which of the following is closest to the theoretical Treasury spot
rate curve?

6-month spot rate 1-year spot rate 18-month spot rate

A) 2.50% 3.2501% 4.1333%
B) 1.25% 3.2501% 4.5305%
C) 2.50% 3.5088% 4.5305%

Question 12 - 96120
Today an investor purchases a $1,000 face value, 10%, 20-year, semi-annual bond at a discount
for $900. He wants to sell the bond in 6 years when he estimates the yields will be 9%. What is the
estimate of the future price?

A) $1,079.
B) $1,152.
C) $946.

Question 13 - 95677

When interest rates increase, the duration of a 30-year bond selling at a discount:

A) increases.
B) decreases.
C) does not change.

Question 14 - 95691

A noncallable bond with seven years remaining to maturity is trading at 108.1% of a par value of
$1,000 and has an 8.5% coupon. If interest rates rise 50 basis points, the bond’s price will fall to
105.3% and if rates fall 50 basis points, the bond’s price will rise to 111.0%. Which of the following
is closest to the effective duration of the bond?

A) 6.12.
B) 5.54.
C) 5.27.