Fixed Income

2. Fixed-Income Cash Flows and Types practice questions

2. Fixed-Income Cash Flows and Types is part of CFA Level I Fixed Income. Fixed Income questions focus on bond cash flows, yield measures, duration, convexity, credit risk, securitization, and curve interpretation. Use this page to review the controlling ideas, then work through 7 questions with answer explanations and common traps.

Review the worked explanations before moving into adaptive practice. The app version can mix this topic with due reviews and weak related concepts.

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What to know

Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.

How to practice

Work each item under time pressure, then compare your reasoning with the step-by-step explanation and key takeaway.

Review signal

Missed questions should become scheduled reviews when the error comes from a concept gap, formula setup, or answer-choice trap.

Easy

Fixed Income

2. Fixed-Income Cash Flows and Types

A bond that repays portions of principal during its life rather than repaying all principal at maturity is most likely:

Very Difficult

Fixed Income

2. Fixed-Income Cash Flows and Types

A company issues a 10-year bond that it may redeem at par after year 4 if market yields decline. The provision is most likely:

Easy

Fixed Income

2. Fixed-Income Cash Flows and Types

A bond that pays periodic interest and repays the entire principal amount at maturity is best described as a:

Easy

Fixed Income

2. Fixed-Income Cash Flows and Types

A payment-in-kind bond is best described as a bond that allows interest to be paid by:

Moderate

Fixed Income

2. Fixed-Income Cash Flows and Types

A floating-rate note pays three-month MRR + 80 bps, subject to a cap of 6.00% and a floor of 2.00%. If MRR is 5.50% on the reset date, the annualized coupon rate for the next period is closest to:

Moderate

Fixed Income

2. Fixed-Income Cash Flows and Types

An investor buys a fixed-rate bond at 98 and sells it one year later at 101 after receiving a coupon of 5. The one-year holding period return is closest to:

Very Difficult

Fixed Income

2. Fixed-Income Cash Flows and Types

For a fixed-rate bond, a holding period shorter than Macaulay duration is most likely dominated by exposure to: