ADM3351 Fixed-Income Investments
Winter 2025
Instructor: Fabio Moneta
Quiz 1
11th February 2025
8:30am-9:50am
• This is an open book test. You are allowed to use the slides, notes, and
textbook to help you answer the questions. You are not allowed to use phones
and other smart devices unless authorized by the instructor.
• You should write the quiz independently. Plagiarism is not tolerated.
• Use a financial calculator to take this quiz.
• Keep 4 decimals. If the answer is 2.99999%, then keep 4 decimals to
2.9999%.
• Show your work for the long-answer problems (except MCQs).
Question 1-5. 6. 7. Total
Maximum 5 points 16 points 9 points 30 points
Points
1
, Enter your choices of Q1-Q5 below
1 2 3 4 5
1. (1 point) A South African company issues bonds denominated in pound sterling that are
sold to investors in the United Kingdom. These bonds can be best described as:
A. Eurobonds.
B. Foreign bonds.
C. Global bonds.
Answer: B. Bonds sold in a country and denominated in that country’s currency by an entity
from another country are referred to as foreign bonds.
2. (1 point) Which of the following provisions is a benefit to the issuer?
A. Put provision
B. Call provision
C. Conversion provision.
Answer: B. A call provision (callable bond) gives the issuer the right to redeem all or part of the
bond before the specified maturity date. If market interest rates decline or the issuer’s credit
quality improves, the issuer of a callable bond can redeem it and replace it by a cheaper bond.
Thus, the call provision is beneficial to the issuer.
3. (1 point) If you buy a 10-year 6% coupon bond today (right after the coupon payment)
and sell it next year (right after the next coupon payment), what is your expected capital
gain yield (i.e., by how many % the price of the bond will increase over the year)?
Assume the bond pays annual coupons, the face value is $1,000 and YTM=8%
A 1.01%
B 1.07%
C 2.86%
answer: b
Solutions: N=10, I/Y=8, PMT=60, FV=1,000. PV=865.8
N=9, ……………………………. PV=875.06
9.17/865.8 = 1.07%
4. (1 point)
2
Winter 2025
Instructor: Fabio Moneta
Quiz 1
11th February 2025
8:30am-9:50am
• This is an open book test. You are allowed to use the slides, notes, and
textbook to help you answer the questions. You are not allowed to use phones
and other smart devices unless authorized by the instructor.
• You should write the quiz independently. Plagiarism is not tolerated.
• Use a financial calculator to take this quiz.
• Keep 4 decimals. If the answer is 2.99999%, then keep 4 decimals to
2.9999%.
• Show your work for the long-answer problems (except MCQs).
Question 1-5. 6. 7. Total
Maximum 5 points 16 points 9 points 30 points
Points
1
, Enter your choices of Q1-Q5 below
1 2 3 4 5
1. (1 point) A South African company issues bonds denominated in pound sterling that are
sold to investors in the United Kingdom. These bonds can be best described as:
A. Eurobonds.
B. Foreign bonds.
C. Global bonds.
Answer: B. Bonds sold in a country and denominated in that country’s currency by an entity
from another country are referred to as foreign bonds.
2. (1 point) Which of the following provisions is a benefit to the issuer?
A. Put provision
B. Call provision
C. Conversion provision.
Answer: B. A call provision (callable bond) gives the issuer the right to redeem all or part of the
bond before the specified maturity date. If market interest rates decline or the issuer’s credit
quality improves, the issuer of a callable bond can redeem it and replace it by a cheaper bond.
Thus, the call provision is beneficial to the issuer.
3. (1 point) If you buy a 10-year 6% coupon bond today (right after the coupon payment)
and sell it next year (right after the next coupon payment), what is your expected capital
gain yield (i.e., by how many % the price of the bond will increase over the year)?
Assume the bond pays annual coupons, the face value is $1,000 and YTM=8%
A 1.01%
B 1.07%
C 2.86%
answer: b
Solutions: N=10, I/Y=8, PMT=60, FV=1,000. PV=865.8
N=9, ……………………………. PV=875.06
9.17/865.8 = 1.07%
4. (1 point)
2
