Question 1

What is the impact on the bond price-yield curve if, all other factors held constant, the maturity of a zero-coupon bond increases? The pricing curve becomes:

Options :

A : more concave.

B : less concave.

C : less convex.

D : more convex.

Answer: D

Question 2

A portfolio manager at a US-based hedge fund has been searching for potentialreturn opportunities in the environment of declining global interest rates experiencedafter the global financial crisis (GFC) of 2007-2009. The manager identifies theexistence of a positive cross-currency basis between two currencies and notes thatthis positive basis has persisted since the GFC. What is the most appropriateexplanation for this persistence?

Options :

A : proprietary trading activities.

B : basis.

C : decline in the overall level of interest rates in the global economy.

D : typically eliminate counterparty risks.

Answer: B

Question 3

In an attempt to understand country risk, an analyst at Global Funds examines multiple sources of information to determine the truest measure of risk. She considers sovereign risk ratings, default risk spreads, and composite measures of risk. Which of the following sources relies on surveys of several hundred economists to measure sovereign risk?

Options :

A : The Economist.

B : Euromoney.

C : The World Bank.

D : Political Risk Services.

Answer: B

Question 4

The chief investment officer (CIO) of a large university endowment fund isconsidering adding some illiquid assets to improve the performance of theuniversity’s investment portfolio. The CIO asks an investment manager to prepare areport discussing the characteristics of illiquid asset returns. The manager reviewsthe dynamics of illiquid assets and the determinants of their returns. Which of thefollowing is a correct statement for the manager to include in the report?

Options :

A : returns of the entire population of funds.

B : returns of those funds that have achieved a return above a required threshold.

C : returns of those funds that continue to remain in business over a given time period are considered.

D : accurate beta and correlation estimates.

Answer: A

Question 5

A fixed-income portfolio manager is conducting a performance analysis on anagency-MBS and the underlying pool of commercial mortgages. The managerobtains the following information:• The constant prepayment rate (CPR) of the commercial mortgages loan pool: 14.38%• Debt payments per year on the commercial mortgage loans: USD 730,000• Net operating income per year of the commercial mortgage property: USD 1,825,000The manager uses the following metrics as benchmarks for the commercial mortgage sector analysis:• Debt service coverage ratio (DSCR) of a benchmark obligor: 2.5• Single monthly mortality (SMM) rate of a benchmark security: 0.85%Which of the following statements is correct?

Options :

A : the reduction in yield on the MBS will likely be higher compared to that on a

B : borrower’s ability to repay the mortgage loan is weaker than that of a comparable

C : the reduction in yield on the MBS will likely be lower compared to that on a

D : borrower’s ability to repay the mortgage loan is stronger than that of a comparable

Answer: A

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