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Questions at a glance:
1. What is fixed income securities? Describe the categories of fixed income securities.
2. What is Indenture and what are the covenants?
3. What is the term to maturity of a bond? Why the term to maturity of a bond is important/crucial?
4. What is par value of a bond? Why a bond sells above or below its par value?
5. What is coupon rate? How does the coupon rate affect the bond’s price sensitivity to changes in
market interest rates?
6. What is zero-coupon bond? How does the holder of a zero-coupon bond realize interest?
7. What is step-up note? What are the types of step-up note?
8. What is deferred coupon bond?
9. Define floating-rate securities. What is the mechanic for the payment and setting of the coupon
rate?
10. Define inverse floaters. Why an investor would be interested in an inverse floater?
11. Why issuers have been able to create floating-rate securities with offbeat coupon formulas?
12. Define accrued interest. What is the exception rule of accrued interest?
13. Define convertible bond and exchangeable bond.
14. Define put provision. What is the advantage of a put provision to the bondholder?
15. Define dollar-denominated issue, non dollar-denominated issue and dual-currency issue.
16. What are the most common embedded options granted to issuers?
17. What are the most common embedded options granted to bondholders?
18. Describe the importance of understanding of embedded options.
19. What is collateralized loan? Which types of collateralized borrowing arrangements are used by
investors?
Questions at a glance:
1. Which types of risk are associated with investing in bonds?
2. Describe the relationships between changes in interest rate and price of bond.
3. Describe the bond features that affect interest rate risk.
4. Why will the price of a floating-rate security fluctuate?
5. How would you measure interest rate risk?
6. Explain the yield curve risk graphically and mathematically.
7. What are the types of credit risk?
Questions at a glance:
1. Which interest rate policy tools are used by Central Bank in implementing monetary policy?
2. What are the risks of Treasury security?
3. Describe the Treasury yield curve graphically.
4. Describe the theories of the term structure of interest rates.
Questions at a glance:
1. What are the steps of valuation of a financial asset?
2. What is cash flow? Why investors find difficulty to estimate the cash flows when they purchase a
fixed income security?
3. How would you determine interest rate?
4. How would you discount the expected cash flows?
5. Describe the relationship between coupon rate, discount rate, and price relative to par
value.
6. Shows how change in a bond’s value as it moves toward maturity.
7. Shows how the movement of a premium, discount, and par bond as a bond moves towards
maturity.
Information about the three bonds: All bonds mature in 20 years and have a yield required
by the market of 8%. Coupon payments are annual. Premium bond is at 10% coupon,
discount bond at 6% coupon and par bond at 8% coupon. Face value of the bonds is Tk.
100.
8. State the reasons for using treasury spot rates.
Questions at a glance:
1. Briefly discuss the factors that influence the value of an option on a fixed income
instrument.
2. Briefly discuss the factors that influence the value of a futures option.
3. Describe the pricing models for options and options on futures.