FIS Exam 1 Review: Key Concepts in Fire and Life Safety
This duration is defined as the time-weighted present value of a bond's cash flows.
A. Macaulay duration
B. Modified duration
C. Key rate duration
D. Effective duration - correct answer ✔✔A. Macaulay duration
Which of the following is the highest non-investment grade rating in the Fitch rating spectrum?
A. BBB+
B. BBB
C. BB+
D. BB-
E. BB
F. BBB- - correct answer ✔✔C. BB+
Assume you own the following three fixed-rate, option-free bonds that are all trading at par
($1,000):
Bond A - 5-year maturity; 5% coupon, lowest duration
Bond B - 10-year maturity; 8% coupon
Bond C - 30-year maturity; 6.5% coupon; highest duration
, If 5 year interest rates decline 15bps, 10 year interest rates increase 30bps, and 30 year interest
rates do not change, the following bond prices would occur $957, $1,000 and $1,013 (note the
bond prices are shown in no particular order)
Based on these illustrated changes in interest rates, which bond is associated with which price?
A. Bond A (5y) = $1,013, Bond B (10y) = $957, Bond C (30y) = $1,000
B. Bond A (5y) = $957, Bond B (10y) = $1,000, Bond C (30y) = $1,013
C. Bond A (5y) = $1,013, Bond B (10y) = $1,000, Bond C (30y) = $957
D. Bond A (5y) = $1,000, Bond B (10y) = $957, Bond C (30y) = $1,013
E. Bond A (5y) = $1,000, Bond B (10y) = $1,013, Bond C (30y) = $957 - correct answer ✔✔A.
Bond A (5y) = $1,013, Bond B (10y) = $957, Bond C (30y) = $1,000
Which of the following statements is least accurate?
A. A home mortgage is an example of an amortizing loan.
B. No answer text provided.
C. Call provisions give the issuer the right and the obligation to retire all or a part of an issue
prior to maturity.
D. Sinking fund provisions provide for the repayment of principal through a series of payments
over the life of the issue. - correct answer ✔✔C. Call provisions give the issuer the right and the
obligation to retire all or a part of an issue prior to maturity.
Which of the following statements is/are true regarding liquidity risk:
A) A bond with a Moody's rating of Baa1 will on average have the more liquidity risk than a
bond with a Moody's rating of Baa3
This duration is defined as the time-weighted present value of a bond's cash flows.
A. Macaulay duration
B. Modified duration
C. Key rate duration
D. Effective duration - correct answer ✔✔A. Macaulay duration
Which of the following is the highest non-investment grade rating in the Fitch rating spectrum?
A. BBB+
B. BBB
C. BB+
D. BB-
E. BB
F. BBB- - correct answer ✔✔C. BB+
Assume you own the following three fixed-rate, option-free bonds that are all trading at par
($1,000):
Bond A - 5-year maturity; 5% coupon, lowest duration
Bond B - 10-year maturity; 8% coupon
Bond C - 30-year maturity; 6.5% coupon; highest duration
, If 5 year interest rates decline 15bps, 10 year interest rates increase 30bps, and 30 year interest
rates do not change, the following bond prices would occur $957, $1,000 and $1,013 (note the
bond prices are shown in no particular order)
Based on these illustrated changes in interest rates, which bond is associated with which price?
A. Bond A (5y) = $1,013, Bond B (10y) = $957, Bond C (30y) = $1,000
B. Bond A (5y) = $957, Bond B (10y) = $1,000, Bond C (30y) = $1,013
C. Bond A (5y) = $1,013, Bond B (10y) = $1,000, Bond C (30y) = $957
D. Bond A (5y) = $1,000, Bond B (10y) = $957, Bond C (30y) = $1,013
E. Bond A (5y) = $1,000, Bond B (10y) = $1,013, Bond C (30y) = $957 - correct answer ✔✔A.
Bond A (5y) = $1,013, Bond B (10y) = $957, Bond C (30y) = $1,000
Which of the following statements is least accurate?
A. A home mortgage is an example of an amortizing loan.
B. No answer text provided.
C. Call provisions give the issuer the right and the obligation to retire all or a part of an issue
prior to maturity.
D. Sinking fund provisions provide for the repayment of principal through a series of payments
over the life of the issue. - correct answer ✔✔C. Call provisions give the issuer the right and the
obligation to retire all or a part of an issue prior to maturity.
Which of the following statements is/are true regarding liquidity risk:
A) A bond with a Moody's rating of Baa1 will on average have the more liquidity risk than a
bond with a Moody's rating of Baa3
