INV3702 INVESTMENTS FIXED INCOME
ANALYSIS EXAM FINAL PAPER 2026 COMPLETE
QUESTIONS AND SOLUTIONS
◉ What is the par value of a bond? Answer: $1000
◉ When is the stated coupon rate of a bond announced? Answer:
Determined almost night before IPO of the bond
◉ Does the stated coupon rate ever change throughout the life of the
bond? Answer: No
◉ We have "R" (also called Y, I, YTM) for bonds. In a corporate
finance class, what is this equivalent to? Answer: Cost of debt capital
from issuers (company or government
◉ How do we calculate R? Answer: Treasury of Equal Maturity +
Yield Spread
◉ What does Treasury of Equal Maturity break down into? Answer:
R + IP + MRP
- R: Real Rate
- IP: Inflation Premium
, - MRP: Maturity Risk Premium
◉ What does Yield Spread break down into? Answer: LRP + DRP
- LRP: Liquidity Risk Premium
- DRP: Default risk Premium
◉ Ceteris Paribus, which bonds have more interest rate risk?
Answer: Long-term bonds have more interest rate risk than short-
term bonds
◉ What graph explains MRP? Answer: Line fluctuations away from
par are extreme at beginning but then humps become smaller over
time as you approach maturity
◉ Typically, (not right now) Yield curve is... Answer: Upward Sloping
◉ An inverted yield curve is predicting what within the next year?
Answer: Recession
◉ What indicates an inverted yield curve? Answer: The 10-year is
below the 1-year and 2-year
◉ Does default mean you get 0? Answer: No, it just means you don't
get the whole amount allotted
ANALYSIS EXAM FINAL PAPER 2026 COMPLETE
QUESTIONS AND SOLUTIONS
◉ What is the par value of a bond? Answer: $1000
◉ When is the stated coupon rate of a bond announced? Answer:
Determined almost night before IPO of the bond
◉ Does the stated coupon rate ever change throughout the life of the
bond? Answer: No
◉ We have "R" (also called Y, I, YTM) for bonds. In a corporate
finance class, what is this equivalent to? Answer: Cost of debt capital
from issuers (company or government
◉ How do we calculate R? Answer: Treasury of Equal Maturity +
Yield Spread
◉ What does Treasury of Equal Maturity break down into? Answer:
R + IP + MRP
- R: Real Rate
- IP: Inflation Premium
, - MRP: Maturity Risk Premium
◉ What does Yield Spread break down into? Answer: LRP + DRP
- LRP: Liquidity Risk Premium
- DRP: Default risk Premium
◉ Ceteris Paribus, which bonds have more interest rate risk?
Answer: Long-term bonds have more interest rate risk than short-
term bonds
◉ What graph explains MRP? Answer: Line fluctuations away from
par are extreme at beginning but then humps become smaller over
time as you approach maturity
◉ Typically, (not right now) Yield curve is... Answer: Upward Sloping
◉ An inverted yield curve is predicting what within the next year?
Answer: Recession
◉ What indicates an inverted yield curve? Answer: The 10-year is
below the 1-year and 2-year
◉ Does default mean you get 0? Answer: No, it just means you don't
get the whole amount allotted
