‘Mitiam Eigen, CPA (CFA Fixed Income Questions 290. Which of the following can influence the level of the risk-free rate? &.economie growth . municipal bond supply ¢, Demand for long maturity bonds 4. none of the above, only Federal Reserve policy levers can adjust the RFR 291. In which of the following scenarios might a practitioner choose to use effective duration as an «estimate for future price changes rather than modified duration? 4, interest rates are expected to remain fairly stable . yield curve twisting and large-scale interest rate changes ©. small, uniform interest rate chafiges across the curve 4. corporate spread widening and small uniform interest rate changes Use the following information to answer questions 292-298: ‘A5% 10 year bond convertible at $50 (conversion ratio is 20/1) is selling for $900. The common stock is selling at $20 but is projected to increase to $80. The stock dividend is $0.30 and the merket yield on comparable non-convertible securities is 11%, 292. What is the straight bond value of this convertible? ) ‘ Malve He Cvk [ite a Stratght bo a, _$900 ror 3 SD las ot —ST000 acl Oe cory 280 $1100 FU foo? i fon party pt ttn pagrg 91? 293, What is te comversin pay ice pple HA bord ant 4 a 855 : yO b._ $90 Pegs eS. oo . $50 re pave ral fort S 294, What is the conversion premiutn ratio? ame ue palm OE ot bod’ nee Soca 13s 10 NOT a bol 7 Yoo 2 tas ed cae 10% Was cer Ee b._Li05% wnt? goo i [Aerie] d. 9.45% iN Y Shand poi? 296, What is the investment premium ratio? 7 lan) ps wy Loma om PY OF vee Gaon ore path er nat He bevd f a 2% - $90. ure b 3% tere ae qrWilliam Bigen, CFA (CPA Fed Income Questions <> a 2.7% 297, What is the yield sacrifice relative to “straight” bonds? - a 05% Yn omer” vont ® dur 036%, bons vit ! 4% oad comgoordie rege d 1.67% 4 : So seceibier «36% 2 forarar dake veomeadringe, te Conver, 298, What isthe payback period? 1" feet ee te opto he. ares bho pie. per i he et aS & Bea od Bare nom Cn ba eee HE a : too~ 4. : Sy 20-4 6,03 yes yeas 70 TE By ae 299. Which of the following bonds ete b,_S6yeus fom He a ill display the least desirable convexity characteristics as rates fall (assume interest rates are at 10%)? ‘a. 10 year, 9% bond, callable in 3 years b, 9.5% GNMA mortgage pass-through security cc. Interest only STRIP (11% FNMA collateral) d. 10 year Treasury 300. As interest rates rise, callable bond prices, . a. fall rise, then level off ce. tise fall, then rise