INV3702 INVESTMENTS FIXED INCOME
ANALYSIS EXAM CERTIFICATION EVALUATION
2026 QUESTIONS AND SOLUTIONS VERIFIED
◉ Factors increasing duration. Answer: Long maturity, low coupon,
low yield
◉ Portfolio Duration. Answer: Market value weighted average of the
durations of each bond in the portfolio
◉ Bullet Duration Structure. Answer: Most of the portfolio is
invested in intermediate maturities around a single point
◉ Barbell Duration Structure. Answer: Portfolio split between short
and long maturities, little in the middle
◉ Forward Rates. Answer: Reflect the market's consensus forecast of
future short-term interest rates
◉ Steepening of the yield curve. Answer: Long term yields rise
relative to short-term yields; signals expectations of stronger growth
or higher future inflation
, ◉ Flattening of the yield curve. Answer: Long-term yields fall
relative to short-term yields; often reflects expectations of slower
growth or eventual rate cuts
◉ Twisting of the yield curve. Answer: Short term and long-term
rates move in opposite directions; curve pivots around a middle
maturity point
◉ Divergence. Answer: Spread widens between two yields
◉ Convergence. Answer: Spread narrows between two yields
◉ Temporary anomalies. Answer: Spreads deviate from historical
norms for non-fundamental reasons
◉ Forecast-based spread strategies. Answer: Spreads are expected
to move because fundamentals are changing (credit outlook, macro
conditions).
◉ Divergence expectation. Answer: Long cheap security, short rich
security if you expect the spread between two securities to widen.
ANALYSIS EXAM CERTIFICATION EVALUATION
2026 QUESTIONS AND SOLUTIONS VERIFIED
◉ Factors increasing duration. Answer: Long maturity, low coupon,
low yield
◉ Portfolio Duration. Answer: Market value weighted average of the
durations of each bond in the portfolio
◉ Bullet Duration Structure. Answer: Most of the portfolio is
invested in intermediate maturities around a single point
◉ Barbell Duration Structure. Answer: Portfolio split between short
and long maturities, little in the middle
◉ Forward Rates. Answer: Reflect the market's consensus forecast of
future short-term interest rates
◉ Steepening of the yield curve. Answer: Long term yields rise
relative to short-term yields; signals expectations of stronger growth
or higher future inflation
, ◉ Flattening of the yield curve. Answer: Long-term yields fall
relative to short-term yields; often reflects expectations of slower
growth or eventual rate cuts
◉ Twisting of the yield curve. Answer: Short term and long-term
rates move in opposite directions; curve pivots around a middle
maturity point
◉ Divergence. Answer: Spread widens between two yields
◉ Convergence. Answer: Spread narrows between two yields
◉ Temporary anomalies. Answer: Spreads deviate from historical
norms for non-fundamental reasons
◉ Forecast-based spread strategies. Answer: Spreads are expected
to move because fundamentals are changing (credit outlook, macro
conditions).
◉ Divergence expectation. Answer: Long cheap security, short rich
security if you expect the spread between two securities to widen.
