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Advanced Wealth Management Course (IIBF) - Paper 3

Part II: Ch 14: The Yield Curve

Q1.

(I) Yield to Maturity is especially important when looking at zero-coupon bonds. (II) A yield curve depicts the relationship between time and yield of a homogeneous risk class of securities.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q2.

A “positive” yield curve is one in which long-term maturities have lower yields than short-term maturities.

True

False

Q3.

(I) A “positively slopped” yield curve usually indicates that Reserve Bank is engaged in a strategy to slow the economy by raising short-term interest rates. (II) Yield to Maturity measures the total income earned by an investor over the entire tenor of the security.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q4.

Factor/s affecting a yield curve is/are:

Fiscal policy

Economic growth

Flight-To-Quality

Both (a) & (b)

All of the above

Q5.

Assume that a ZCB (face value of Rs. 100) with a six months maturity is currently being traded @ 96.50/- . What would be the 6 month zero coupon rate?

7.1%

7.385%

6.1%

6.385%

Q6.

(I) The liquidity premium theory asserts that long-term yields should average higher than short-term yields. (II) Bootstrapping is an iterative process of generating a Zero Coupon Yield curve from the observed prices/yields of coupon bearing securities.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q7.

The expectations theory asserts that the yield curve is composed of a series of somewhat independent maturity segments.

True

False

Q8.

(I) The segmentation theory asserts that long-term yields are the average of the short-term yields prevailing during the intervening period. (II) A neutral yield curve is that which has a zero slope.

Both the statements are correct

Only statement (I) is correct

Only statement (II) is correct

Both the statements are wrong

Q9.

The factor/s which can result in yield curves departing from their “normal shapes” is/are:

Volatility

Monetary policy

Uncertainty

Both (a) & (b)

All of the above

Q10.