FINC409/609 - Fixed Income Securities
Prof. Matt Fleckenstein
Lecture 1 - Quiz
1. Which statement best describes a fixed income security?
A. Guarantees returns that never change
B. A loan with standardized promised cash flows
C. Depends entirely on stock market performance
D. Cannot carry risk
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2. Which is NOT a major issuer category?
A. Federal Government
B. Municipalities
C. Corporations
D. Venture Capital Firms
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3. Difference between fixed-coupon and zero-coupon bonds?
A. Both pay interest only at maturity
B. Zero-coupon pays periodically
C. Fixed-coupon pays periodically; zero-coupon pays at maturity
D. Both pay periodically
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4. Why do callable bonds offer lower prices (higher yields)?
A. They are safer
B. Issuer can redeem early
C. They always carry collateral
D. No interest rate risk
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5. Which is collateralized?
A. T-bill
B. Corporate bond
C. Mortgage-backed security
D. CDS
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6. Treasury market share?
A. ~10%
B. ~20%
C. ~40%
D. ~75%
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7. Which rating is NOT investment grade?
A. A+
B. BBB
C. AAA
D. BB+
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8. Treasury maturities?
A. Bills > 10 yrs
B. Notes ≤ 1 yr
C. Bonds > 10 yrs
D. Notes > 30 yrs
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9. GO vs Revenue municipal bonds?
A. GO = project revenues
B. GO = taxing power; Revenue = project cash flows
C. GO = states only
D. Revenue bonds always safer
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10. How are ABS tranches created?
A. Receivables divided into classes by priority
B. Investors choose risk randomly
C. No structuring
D. Each account becomes its own bond
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