HART FIXED INCOME EXAM 2
QUESTIONS AND ANSWERS GRADED A+
2025/2026
What are floating rate notes? - ANS - Interest rate you receive will change
What is the par value of a bond? - ANS $1000
When is the stated coupon rate of a bond announced? - ANS Determined almost night before
IPO of the bond
Does the stated coupon rate ever change throughout the life of the bond? - ANS No
We have "R" (also called Y, I, YTM) for bonds. In a corporate finance class, what is this equivalent
to? - ANS Cost of debt capital from issuers (company or government
How do we calculate R? - ANS Treasury of Equal Maturity + Yield Spread
What does Treasury of Equal Maturity break down into? - ANS R + IP + MRP
- R: Real Rate
- IP: Inflation Premium
- MRP: Maturity Risk Premium
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, What does Yield Spread break down into? - ANS LRP + DRP
- LRP: Liquidity Risk Premium
- DRP: Default risk Premium
Ceteris Paribus, which bonds have more interest rate risk? - ANS Long-term bonds have more
interest rate risk than short-term bonds
What graph explains MRP? - ANS Line fluctuations away from par are extreme at beginning
but then humps become smaller over time as you approach maturity
Typically, (not right now) Yield curve is... - ANS Upward Sloping
An inverted yield curve is predicting what within the next year? - ANS Recession
What indicates an inverted yield curve? - ANS The 10-year is below the 1-year and 2-year
Does default mean you get 0? - ANS No, it just means you don't get the whole amount
allotted
What is the bid ask spread? - ANS The difference in price available for an immediate sale of a
stock and the immediate purchase of that stock
What price do you buy at? - ANS Ask
What price do you sell at? - ANS Bid
What does NRSRO mean - ANS Nationally Recognized Statistical Rating Organization
How many NRSRO's are there? - ANS 3
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
QUESTIONS AND ANSWERS GRADED A+
2025/2026
What are floating rate notes? - ANS - Interest rate you receive will change
What is the par value of a bond? - ANS $1000
When is the stated coupon rate of a bond announced? - ANS Determined almost night before
IPO of the bond
Does the stated coupon rate ever change throughout the life of the bond? - ANS No
We have "R" (also called Y, I, YTM) for bonds. In a corporate finance class, what is this equivalent
to? - ANS Cost of debt capital from issuers (company or government
How do we calculate R? - ANS Treasury of Equal Maturity + Yield Spread
What does Treasury of Equal Maturity break down into? - ANS R + IP + MRP
- R: Real Rate
- IP: Inflation Premium
- MRP: Maturity Risk Premium
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, What does Yield Spread break down into? - ANS LRP + DRP
- LRP: Liquidity Risk Premium
- DRP: Default risk Premium
Ceteris Paribus, which bonds have more interest rate risk? - ANS Long-term bonds have more
interest rate risk than short-term bonds
What graph explains MRP? - ANS Line fluctuations away from par are extreme at beginning
but then humps become smaller over time as you approach maturity
Typically, (not right now) Yield curve is... - ANS Upward Sloping
An inverted yield curve is predicting what within the next year? - ANS Recession
What indicates an inverted yield curve? - ANS The 10-year is below the 1-year and 2-year
Does default mean you get 0? - ANS No, it just means you don't get the whole amount
allotted
What is the bid ask spread? - ANS The difference in price available for an immediate sale of a
stock and the immediate purchase of that stock
What price do you buy at? - ANS Ask
What price do you sell at? - ANS Bid
What does NRSRO mean - ANS Nationally Recognized Statistical Rating Organization
How many NRSRO's are there? - ANS 3
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
