TERMS OF INTEREST RATES AND
MANAGING BONDS EXAM
QUESTIONS & VALID COMPLETE
SOLUTIONS 100%
term structure of interest rates - Correct Answer ✔✔ pattern of interest rates appropriate
for discounting cash flows of various maturities.
relation between YTM and TTM
15 intro - Correct Answer ✔✔ prices of T-bonds may be derived from prices and yields
of stripped zero-coupon Treasury securities
term structure reveals forecasts of future rates and how presence of risk affects
inferences
traders can use term structure to compute forward rates that represent interest rates on
deferred loans. there is a relationship between forward rates and future interest rates
yield intro notes - Correct Answer ✔✔ longer terms have higher yields. but how is that
actually valued?
yield curve - Correct Answer ✔✔ a graph of yield to maturity as a function of term to
maturity
a normal yield curve is convex
bond pricing - Correct Answer ✔✔ bond cash flows :))))
Stripped Treasury Bonds - Correct Answer ✔✔ zero coupon bonds created by selling
each coupon as separate CF
the process of separating individual interest payments and principal repayment into
separate securities
bond stripping - Correct Answer ✔✔ Selling bond cash flows (either coupon or principal
payments) as stand-alone zero-coupon securities.
bond reconstitution - Correct Answer ✔✔ Combining zero-coupon stripped securities to
re-create the original cash flows of a coupon bond.
MANAGING BONDS EXAM
QUESTIONS & VALID COMPLETE
SOLUTIONS 100%
term structure of interest rates - Correct Answer ✔✔ pattern of interest rates appropriate
for discounting cash flows of various maturities.
relation between YTM and TTM
15 intro - Correct Answer ✔✔ prices of T-bonds may be derived from prices and yields
of stripped zero-coupon Treasury securities
term structure reveals forecasts of future rates and how presence of risk affects
inferences
traders can use term structure to compute forward rates that represent interest rates on
deferred loans. there is a relationship between forward rates and future interest rates
yield intro notes - Correct Answer ✔✔ longer terms have higher yields. but how is that
actually valued?
yield curve - Correct Answer ✔✔ a graph of yield to maturity as a function of term to
maturity
a normal yield curve is convex
bond pricing - Correct Answer ✔✔ bond cash flows :))))
Stripped Treasury Bonds - Correct Answer ✔✔ zero coupon bonds created by selling
each coupon as separate CF
the process of separating individual interest payments and principal repayment into
separate securities
bond stripping - Correct Answer ✔✔ Selling bond cash flows (either coupon or principal
payments) as stand-alone zero-coupon securities.
bond reconstitution - Correct Answer ✔✔ Combining zero-coupon stripped securities to
re-create the original cash flows of a coupon bond.
