L1 CFA Practice Lab Adaptive Level I exam simulator
CFA Level I subject

Fixed Income practice questions

Fixed Income questions focus on bond cash flows, yield measures, duration, convexity, credit risk, securitization, and curve interpretation. This section currently includes 24 public practice questions across 35 topic modules, with explanations, formulas, traps, and key takeaways.

Indicative public exam weight: 11-14%. Start with a topic guide when you need focused review, or use adaptive mode for mixed practice and due reviews.

Try free quiz Mixed free questions

14. Credit Risk

0 public questions with explanations, formulas, and exam traps.

Bond Returns

1 public question with explanations, formulas, and exam traps.

Bond Valuation

5 public questions with explanations, formulas, and exam traps.

Convexity

1 public question with explanations, formulas, and exam traps.

Credit Analysis

1 public question with explanations, formulas, and exam traps.

Credit Risk

1 public question with explanations, formulas, and exam traps.

Duration

2 public questions with explanations, formulas, and exam traps.

MBS and ABS

1 public question with explanations, formulas, and exam traps.

Securitization

1 public question with explanations, formulas, and exam traps.

Term Structure

1 public question with explanations, formulas, and exam traps.

Yield Measures

3 public questions with explanations, formulas, and exam traps.

Moderate

Fixed Income

Bond Returns

An investor buys a bond for USD980, receives a USD30 coupon after six months and reinvests it for six months at a periodic rate of 1.0%, receives another USD30 coupon at year-end, and sells the bond for USD1,005. The one-year holding period return is closest to:

View sample
Moderate

Fixed Income

Bond Valuation

A 5-year bond with face value USD1,000 pays a 6% annual coupon semiannually. Its yield to maturity is 7% compounded semiannually. The full price on a coupon date is closest to:

View sample
Moderate

Fixed Income

Bond Valuation

A 7-year bond pays a 5% annual coupon semiannually and is priced at 94.25 per 100 of par on a coupon date. The annualized yield to maturity with semiannual compounding is closest to:

View sample
Moderate

Fixed Income

Bond Valuation

A bond with face value USD1,000 pays a 6% coupon semiannually. The last coupon was paid 110 days ago, and there are 180 days in the coupon period. The quoted flat price is USD1,012.40. The full price is closest to:

View sample
Moderate

Fixed Income

Bond Valuation

Two option-free bonds have the same maturity and yield. Bond X has a 3% coupon and Bond Y has a 7% coupon. The current yield is below the YTM for X and above the YTM for Y. The bonds are most likely trading, respectively, at:

View sample
Moderate

Fixed Income

Bond Valuation

An illiquid 4-year 4.8% corporate bond with no recent trades is valued using yields on traded bonds of similar credit quality and maturities of 3 and 5 years. This valuation method is best described as:

View sample
Moderate

Fixed Income

Cash Flows and Types

A bond allows the issuer to redeem the bond before maturity when rates fall, while another bond allows the investor to sell the bond back to the issuer at par after three years. The first and second provisions most likely:

View sample
Moderate

Fixed Income

Cash Flows and Types

A floating-rate note pays three-month reference rate plus 120 bps, resets quarterly, and currently trades at par immediately after reset. If market required margin for this issuer rises to 170 bps before the next reset, the note will most likely trade:

View sample
Moderate

Fixed Income

Convexity

A bond has modified duration of 6.80 and convexity of 58.0. If its yield rises by 75 bps, the approximate percentage price change is closest to:

View sample
Moderate

Fixed Income

Corporate, Government, and Money Market Instruments

A securities dealer obtains overnight funding by selling government securities to a cash investor and agreeing to repurchase them tomorrow at a higher price. For the dealer, the transaction is best described as:

View sample
Moderate

Fixed Income

Credit Analysis

In a bankruptcy waterfall, a secured senior bond and an unsecured senior bond of the same issuer have identical maturities. The secured senior bond most likely has:

View sample
Moderate

Fixed Income

Credit Risk

A lender has a USD10 million exposure to a borrower. The one-year probability of default is 2.5%, and the expected recovery rate conditional on default is 45%. Expected credit loss is closest to:

View sample
Moderate

Fixed Income

Duration

A 3-year bond with face value 100 pays a 4% annual coupon and yields 5% annually. Its Macaulay duration is closest to:

View sample
Moderate

Fixed Income

Duration

A bond has Macaulay duration of 7.20 years, YTM of 6.00% compounded semiannually, full price of 98.40 per 100 par, and no embedded options. Its modified duration and PVBP per 100 par are closest to:

View sample
Moderate

Fixed Income

Effective Duration

A callable bond is priced at 100.50. If the benchmark curve shifts down 50 bps, the price is 104.90; if the curve shifts up 50 bps, the price is 96.80. The effective duration is closest to:

View sample
Moderate

Fixed Income

Instrument Features

A bond indenture requires the issuer to maintain insurance on pledged collateral and limits additional debt if debt/EBITDA exceeds 4.0x. These provisions are best classified, respectively, as:

View sample
Moderate

Fixed Income

MBS and ABS

Mortgage rates fall sharply after a collateralized mortgage obligation is issued. For a planned amortization class tranche, the main risk support tranches are designed to absorb first is most likely:

View sample
Moderate

Fixed Income

Money Market Yield Measures

A 180-day Treasury bill with face value USD1,000,000 is purchased for USD970,000. Using a 360-day year, the discount basis yield is closest to:

View sample
Moderate

Fixed Income

Portfolio Duration

A fixed-income portfolio contains three positions with market values of USD20 million, USD35 million, and USD45 million and durations of 2.1, 5.4, and 7.2. The portfolio duration is closest to:

View sample
Moderate

Fixed Income

Securitization

A bank issues covered bonds backed by mortgage loans that remain on its balance sheet. Investors have recourse to both the cover pool and the issuing bank. This structure differs from a typical ABS primarily because:

View sample
Moderate

Fixed Income

Term Structure

The 1-year spot rate is 3.00%, and the 2-year spot rate is 4.20%, both annual effective rates. The 1-year forward rate beginning one year from today is closest to:

View sample
Moderate

Fixed Income

Yield Measures

An annual stated yield is quoted at 5.60% with quarterly compounding. The effective annual yield is closest to:

View sample
Moderate

Fixed Income

Yield Measures

A premium bond is callable in 3 years at 100. It has 8 years to maturity, a 7% annual coupon paid semiannually, and a current price of 104 per 100 of par. The YTM is 6.35% and the yield-to-call is 5.53%. The yield-to-worst is:

View sample
Moderate

Fixed Income

Yield Measures

An option-free corporate bond has a YTM of 6.20%, and a maturity-matched government bond yields 4.85%. The corporate bond's nominal spread is closest to:

View sample