1|Page
FINANCIAL STATEMENT MODELING RETAKE ACTUAL
EXAM FROM WALL STREET PREP ALL QUESTIONS AND
CORRECT ANSWERS GRADED A+ 2026/ WSP FINANCIAL
STATEMENT MODELING RETAKE EXAM LATEST VERSION
2026 (NEW!!)
Duration of a perpetual bond will generally decrease with the
following variable(s):
A. Yield to maturity.
B. Coupon rate.
C. Term to maturity
D. All answers are correct
A
Duration of a perpetual bond will not change with the following
variable(s):
A. Coupon rate.
B. Term to maturity.
C. Both answers (A&B) are correct.
D. None of the answers is correct
C
pg. 1
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Which of the following statement(s) is/are correct if there is a one-
time parallel shift in the yield curve that occurs before the next
coupon date?
A. The investor has a duration gap of zero will be currently hedged
against interest rate risk.
B. The investor has a positive gap will be at risk of lower rates.
C. The investor has a negative gap will be at risk of higher rates.
D. All of the answers are correct
A
Which of the following characteristics that a good model for interest
rates should not exhibit?
A. Interest rates cannot be less than zero
B. Volatility of interest rates is related to time, or horizon
C. Higher volatility at lower interest rates
D. None of the answers is correct
C
Which of the following statement(s) about bond valuation is/are true?
pg. 2
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A. For option-free bonds, the size and timing of the bond's cash flows
do not get impacted by the changes in interest rates.
B. For option-embedded bonds, their expected future cash flows are
interest rate dependent.
C. Both the answers (A&B) are correct.
D. None of the answers is correct
C
Continue from the last question. Suppose you could not find Bonds A
and B in the market, but you found a new default-free bond - Bond C
with YTM equal to the client's target YTM and maturity of 6 years. This
bond also has a duration of exactly 4.56 years. Hence, you recommend
your client to invest in this new bond instead.
However, you change your mind and persuade your client to liquidate
it in 5 years rather than 4.56 years.
In this case, what type of risk your client is mostly exposed to?
A. None of the listed risks.
B. Price risk.
C. Reinvestment risk.
D. Credit risk.
C
pg. 3
FINANCIAL STATEMENT MODELING RETAKE ACTUAL
EXAM FROM WALL STREET PREP ALL QUESTIONS AND
CORRECT ANSWERS GRADED A+ 2026/ WSP FINANCIAL
STATEMENT MODELING RETAKE EXAM LATEST VERSION
2026 (NEW!!)
Duration of a perpetual bond will generally decrease with the
following variable(s):
A. Yield to maturity.
B. Coupon rate.
C. Term to maturity
D. All answers are correct
A
Duration of a perpetual bond will not change with the following
variable(s):
A. Coupon rate.
B. Term to maturity.
C. Both answers (A&B) are correct.
D. None of the answers is correct
C
pg. 1
,2|Page
Which of the following statement(s) is/are correct if there is a one-
time parallel shift in the yield curve that occurs before the next
coupon date?
A. The investor has a duration gap of zero will be currently hedged
against interest rate risk.
B. The investor has a positive gap will be at risk of lower rates.
C. The investor has a negative gap will be at risk of higher rates.
D. All of the answers are correct
A
Which of the following characteristics that a good model for interest
rates should not exhibit?
A. Interest rates cannot be less than zero
B. Volatility of interest rates is related to time, or horizon
C. Higher volatility at lower interest rates
D. None of the answers is correct
C
Which of the following statement(s) about bond valuation is/are true?
pg. 2
, 3|Page
A. For option-free bonds, the size and timing of the bond's cash flows
do not get impacted by the changes in interest rates.
B. For option-embedded bonds, their expected future cash flows are
interest rate dependent.
C. Both the answers (A&B) are correct.
D. None of the answers is correct
C
Continue from the last question. Suppose you could not find Bonds A
and B in the market, but you found a new default-free bond - Bond C
with YTM equal to the client's target YTM and maturity of 6 years. This
bond also has a duration of exactly 4.56 years. Hence, you recommend
your client to invest in this new bond instead.
However, you change your mind and persuade your client to liquidate
it in 5 years rather than 4.56 years.
In this case, what type of risk your client is mostly exposed to?
A. None of the listed risks.
B. Price risk.
C. Reinvestment risk.
D. Credit risk.
C
pg. 3
