IFIC Exam (Chapter 7) Questions with All
Solved Solutions 2026/2027 Updated.
Fixed Income Security Examples - Answer -bonds (gov and corporate)
-guaranteed investment certificates (GICs),
-Treasury bills (T-bills)
bankers' acceptances
-commercial paper.
Equity Securities Examples - Answer -common shares
-preferred shares
Fixed-Income Securities - Answer -debt issued by an entity in the financial market and sold to
investors.
-loans that investors make to governments and corporations.
-represent the debt of the issuing entity and investors become creditors of the issuing
organization.
-pay, or are expected to pay, a fixed amount of return on a regular basis to investors (principal
and interest)
Coupons (Coupon Rate) - Answer -the terms of a fixed-income security include a promise to
repay the maturity value or principal on the maturity date, and to pay interest at stated intervals
over the life of the security. These regular payments made from the issuer to the holder of the
debt are called coupons.
-the coupon represents the "fixed" income the bondholder receives from holding the bond, and
is also referred to as interest income, bond income or coupon income
-calculated at face value of bond
Leverage - Answer -if a corporation believes they can earn a greater return on cash invested in
their business than it would cost to borrow money, they can increase the return on the business
by borrowing money.
Bonds - Answer -loans that investors make to governments and corporations. The borrower
(the government or corporation) agrees to make regular interest payments (coupon payments)
and pay back the principal or par value (original amount issued) on the bond's maturity date.
-bonds are a long-term, fixed obligation debt security that is secured by physical assets. If this
security goes into default
-only purchased in specific denominations (ex: $1000
, -After being issued, bonds are bought and sold between investors in the secondary market at a
stated price and a quoted yield
-the coupon rate, along with the face value and maturity date, do not change, the price and
yield of a bond fluctuates from day to day
Semi-Annual Coupon Payment Calculation - Answer -multiply the par value of the bond by the
annual coupon rate and then divides the result by two to arrive at the semi-annual payment
amount.
Maturity Date - Answer -date at which the bond matures or expires. On this date, the
bondholder expects to get the par value or principal of the bond paid back.
Trading at Face Value (Par) - Answer -if the yield (interest rate) is equal to the coupon rate, the
bond is trading at par.
-bond prices are quoted using an index with a base value of 100.
-bond trading at 100 is said to be trading at face value, or par
Trading Below Par (Discount) - Answer -if the yield (interest rate) is greater than the coupon
rate, the bond is trading at a discount
-a bond trading below par, say at a price of 98, is said to be trading at a discount
-interest rate, yield and yield to maturity
Trading Above Par (Premium) - Answer -if the yield (interest rate) is lower than the coupon
rate, the bond is trading at a premium
-a bond trading above par, say at a price of 104, is said to be trading at a premium.
Government Bonds - Answer -issued by the federal, provincial and municipal governments in
order to finance public spending
-There is an active secondary market for marketable government bonds on the over-the-counter
(OTC) market.
-virtually no default risk (governments can simply increase taxes to make good on the promise
to make the coupon payment or repay the par value at maturity) but still have interest rate risk
-federal least risky, municipal most
Default Risk - Answer -risk that the issuer would not be able to repay the coupon over the life
of the bond or the principal at maturity
Treasury Bill - Answer -short-term government obligations. They are offered in denominations
from $1,000 up to $1 million
Solved Solutions 2026/2027 Updated.
Fixed Income Security Examples - Answer -bonds (gov and corporate)
-guaranteed investment certificates (GICs),
-Treasury bills (T-bills)
bankers' acceptances
-commercial paper.
Equity Securities Examples - Answer -common shares
-preferred shares
Fixed-Income Securities - Answer -debt issued by an entity in the financial market and sold to
investors.
-loans that investors make to governments and corporations.
-represent the debt of the issuing entity and investors become creditors of the issuing
organization.
-pay, or are expected to pay, a fixed amount of return on a regular basis to investors (principal
and interest)
Coupons (Coupon Rate) - Answer -the terms of a fixed-income security include a promise to
repay the maturity value or principal on the maturity date, and to pay interest at stated intervals
over the life of the security. These regular payments made from the issuer to the holder of the
debt are called coupons.
-the coupon represents the "fixed" income the bondholder receives from holding the bond, and
is also referred to as interest income, bond income or coupon income
-calculated at face value of bond
Leverage - Answer -if a corporation believes they can earn a greater return on cash invested in
their business than it would cost to borrow money, they can increase the return on the business
by borrowing money.
Bonds - Answer -loans that investors make to governments and corporations. The borrower
(the government or corporation) agrees to make regular interest payments (coupon payments)
and pay back the principal or par value (original amount issued) on the bond's maturity date.
-bonds are a long-term, fixed obligation debt security that is secured by physical assets. If this
security goes into default
-only purchased in specific denominations (ex: $1000
, -After being issued, bonds are bought and sold between investors in the secondary market at a
stated price and a quoted yield
-the coupon rate, along with the face value and maturity date, do not change, the price and
yield of a bond fluctuates from day to day
Semi-Annual Coupon Payment Calculation - Answer -multiply the par value of the bond by the
annual coupon rate and then divides the result by two to arrive at the semi-annual payment
amount.
Maturity Date - Answer -date at which the bond matures or expires. On this date, the
bondholder expects to get the par value or principal of the bond paid back.
Trading at Face Value (Par) - Answer -if the yield (interest rate) is equal to the coupon rate, the
bond is trading at par.
-bond prices are quoted using an index with a base value of 100.
-bond trading at 100 is said to be trading at face value, or par
Trading Below Par (Discount) - Answer -if the yield (interest rate) is greater than the coupon
rate, the bond is trading at a discount
-a bond trading below par, say at a price of 98, is said to be trading at a discount
-interest rate, yield and yield to maturity
Trading Above Par (Premium) - Answer -if the yield (interest rate) is lower than the coupon
rate, the bond is trading at a premium
-a bond trading above par, say at a price of 104, is said to be trading at a premium.
Government Bonds - Answer -issued by the federal, provincial and municipal governments in
order to finance public spending
-There is an active secondary market for marketable government bonds on the over-the-counter
(OTC) market.
-virtually no default risk (governments can simply increase taxes to make good on the promise
to make the coupon payment or repay the par value at maturity) but still have interest rate risk
-federal least risky, municipal most
Default Risk - Answer -risk that the issuer would not be able to repay the coupon over the life
of the bond or the principal at maturity
Treasury Bill - Answer -short-term government obligations. They are offered in denominations
from $1,000 up to $1 million
