CMSA Verified Multiple Choice and Conceptual
Actual Emended Exam Questions With
Reviewed 100% Correct Detailed Answers
Guaranteed Pass!!Current Update
1. What is the present value of $1,000 to be received 5 years from now,
discounted at 6% annually?
Formula: PV = FV / (1 + r)^n
PV = 1,000 / (1.06)^5 = $747.26
Correct answer: A
2. You invest $5,000 in a savings account earning 4% compounded annually. What
will be the value after 10 years?
Formula: FV = PV × (1 + r)^n
FV = 5,000 × (1.04)^10 = $7,401.22
Correct answer: B
3. Which of the following statements is true about annuities?
Correct answer: C
The future value of an annuity increases with a higher interest rate.
✖ A: Annuity due pays at the beginning of each period.
✖ B: A perpetuity has no maturity.
✖ D: An annuity due has a higher PV than an ordinary annuity (payments come
earlier).
,4. What is the effective annual rate (EAR) of a 12% nominal rate compounded
quarterly?
Formula: EAR = (1 + r/m)^m – 1
EAR = (1 + 0.12/4)^4 – 1 = 12.55%
Correct answer: A
Bonds
5. A bond with a $1,000 face value and 6% coupon (annual) matures in 4 years. If
the market rate is 5%, what is its price?
Coupon = $60/year
PV = $60 × [1 – (1 + 0.05)^-4]/0.05 + $1,000/(1.05)^4 = $1,045.75
Correct answer: C
6. Which of the following best describes the relationship between interest rates
and bond prices?
Correct answer: C
They are inversely related: rates ↑ → bond prices ↓ and vice versa.
7. Which type of bond is most sensitive to interest rate changes?
Correct answer: B
Long-term, low-coupon bonds have the highest duration, so they are most
sensitive to rate changes.
8. A bond pays $40 every six months and has a current price of $950. What is the
bond's current yield?
Annual coupon = $80
Current yield = = 8.42%
Correct answer: C
, Accrued Interest & Bond Pricing
9. What is the accrued interest on a bond with a 5% annual coupon paid
semiannually, face value of $1,000, if 45 days have passed since the last payment?
(Use 30/360 method)
Coupon = 2.5% per 6 months = $25
Accrued = 25 × () = $6.25
Correct answer: B
10. What does “yield to maturity” (YTM) represent for a bondholder?
Correct answer: C
YTM is the internal rate of return assuming the bond is held to maturity and
all payments are reinvested at the same rate.
11. Based on our course materials, organize the various roles (from 1 to 5) of
Origination/Sales & Trading team members, starting with Relationship
Management focused roles, ending with day-to-day operational support. -
ANSWER
12. As an Analyst or Associate on the Origination team, which of the tasks is most
likely to be your top priority on Deal Day? - ANSWER term sheet, pricing
13. If a principal amount of $1,000 earns 6% per year compounded annually in the
first 2 years and 3% in the last 2 years, how much will you have total at the end of
year 4? - ANSWER 6% 6% 3% 3%
1000*6% 60* (1+6%) 63.6*(1+3%) 65.50* ( 1+3%)
1000*6%
, 14. What's the discount factor if you are going to receive $500 ten years from now
with an 8% annual interest? - ANSWER Answer:
Discount Factor=1(1+r)n=1(1+0.08)10=12.1589≈0.462\text{Discount Factor} =
\frac{1}{(1 + r)^n} = \frac{1}{(1 + 0.08)^{10}} = \frac{1}{2.1589} \approx
0.462Discount Factor=(1+r)n1=(1+0.08)101=2.15891≈0.462
0.462
15. What's the effective rate for investment with a 6% annual rate, compounded
quarterly? - ANSWER Effective Annual Rate (EAR)=(1+nr)n−1=(1+40.06
)4−1=(1.015)4−1≈0.0614
6.14%
16. What are SWFs commonly established from? - ANSWER Excess reserves
from natural resource exports (e.g., oil revenues) or trade surpluses.
17. How does an increase in the Central Bank's policy rate effect it's domestic
bond market - ANSWER Bond prices typically fall as yields rise. (Interest rates
↑ → bond prices ↓)
18. What is not true about fiat money? - ANSWER It is backed by a
physical commodity like gold or silver. (False)
(Fiat money has no intrinsic value and is backed only by government decree.)
19. What's the best way to manage the situation where individuals rationalize
committing misconduct in an organization? - ANSWER Create a strong
ethical culture with accountability, training, and clear reporting mechanisms.
Actual Emended Exam Questions With
Reviewed 100% Correct Detailed Answers
Guaranteed Pass!!Current Update
1. What is the present value of $1,000 to be received 5 years from now,
discounted at 6% annually?
Formula: PV = FV / (1 + r)^n
PV = 1,000 / (1.06)^5 = $747.26
Correct answer: A
2. You invest $5,000 in a savings account earning 4% compounded annually. What
will be the value after 10 years?
Formula: FV = PV × (1 + r)^n
FV = 5,000 × (1.04)^10 = $7,401.22
Correct answer: B
3. Which of the following statements is true about annuities?
Correct answer: C
The future value of an annuity increases with a higher interest rate.
✖ A: Annuity due pays at the beginning of each period.
✖ B: A perpetuity has no maturity.
✖ D: An annuity due has a higher PV than an ordinary annuity (payments come
earlier).
,4. What is the effective annual rate (EAR) of a 12% nominal rate compounded
quarterly?
Formula: EAR = (1 + r/m)^m – 1
EAR = (1 + 0.12/4)^4 – 1 = 12.55%
Correct answer: A
Bonds
5. A bond with a $1,000 face value and 6% coupon (annual) matures in 4 years. If
the market rate is 5%, what is its price?
Coupon = $60/year
PV = $60 × [1 – (1 + 0.05)^-4]/0.05 + $1,000/(1.05)^4 = $1,045.75
Correct answer: C
6. Which of the following best describes the relationship between interest rates
and bond prices?
Correct answer: C
They are inversely related: rates ↑ → bond prices ↓ and vice versa.
7. Which type of bond is most sensitive to interest rate changes?
Correct answer: B
Long-term, low-coupon bonds have the highest duration, so they are most
sensitive to rate changes.
8. A bond pays $40 every six months and has a current price of $950. What is the
bond's current yield?
Annual coupon = $80
Current yield = = 8.42%
Correct answer: C
, Accrued Interest & Bond Pricing
9. What is the accrued interest on a bond with a 5% annual coupon paid
semiannually, face value of $1,000, if 45 days have passed since the last payment?
(Use 30/360 method)
Coupon = 2.5% per 6 months = $25
Accrued = 25 × () = $6.25
Correct answer: B
10. What does “yield to maturity” (YTM) represent for a bondholder?
Correct answer: C
YTM is the internal rate of return assuming the bond is held to maturity and
all payments are reinvested at the same rate.
11. Based on our course materials, organize the various roles (from 1 to 5) of
Origination/Sales & Trading team members, starting with Relationship
Management focused roles, ending with day-to-day operational support. -
ANSWER
12. As an Analyst or Associate on the Origination team, which of the tasks is most
likely to be your top priority on Deal Day? - ANSWER term sheet, pricing
13. If a principal amount of $1,000 earns 6% per year compounded annually in the
first 2 years and 3% in the last 2 years, how much will you have total at the end of
year 4? - ANSWER 6% 6% 3% 3%
1000*6% 60* (1+6%) 63.6*(1+3%) 65.50* ( 1+3%)
1000*6%
, 14. What's the discount factor if you are going to receive $500 ten years from now
with an 8% annual interest? - ANSWER Answer:
Discount Factor=1(1+r)n=1(1+0.08)10=12.1589≈0.462\text{Discount Factor} =
\frac{1}{(1 + r)^n} = \frac{1}{(1 + 0.08)^{10}} = \frac{1}{2.1589} \approx
0.462Discount Factor=(1+r)n1=(1+0.08)101=2.15891≈0.462
0.462
15. What's the effective rate for investment with a 6% annual rate, compounded
quarterly? - ANSWER Effective Annual Rate (EAR)=(1+nr)n−1=(1+40.06
)4−1=(1.015)4−1≈0.0614
6.14%
16. What are SWFs commonly established from? - ANSWER Excess reserves
from natural resource exports (e.g., oil revenues) or trade surpluses.
17. How does an increase in the Central Bank's policy rate effect it's domestic
bond market - ANSWER Bond prices typically fall as yields rise. (Interest rates
↑ → bond prices ↓)
18. What is not true about fiat money? - ANSWER It is backed by a
physical commodity like gold or silver. (False)
(Fiat money has no intrinsic value and is backed only by government decree.)
19. What's the best way to manage the situation where individuals rationalize
committing misconduct in an organization? - ANSWER Create a strong
ethical culture with accountability, training, and clear reporting mechanisms.
