10 questions · Select the best answer · 3 attempts per question · Hints and explanations provided
0 of 10 questions answered
Question 1. For a risky corporate bond, which ordering of return measures is correct, from highest to lowest?
Question 2. You own a Treasury bond. The Fed unexpectedly raises interest rates. Intuitively, why does your bond's price fall?
Question 3. The U.S. Treasury yield curve inverts — 2-year yields rise above 10-year yields. Under the expectations hypothesis, what does this most reliably signal?
Question 4. The Federal Reserve's dual mandate, as defined by Congress, requires the Fed to pursue:
Question 5. Financial markets replaced LIBOR with SOFR as the primary reference rate for floating-rate instruments. What was the fundamental reason for this transition?
Question 6. A corporate bond is trading at par with a 7% promised yield. News breaks that the company's financial condition has deteriorated significantly, raising its default probability. What happens in the bond market?
Question 7. Which of the following correctly lists the primary risk categories that bond investors face, as covered in Week 1?
Bond Pricing — Questions 8–10 use the following setup:
A 2-year bond has a face value of $1,000 and pays an annual coupon of 6% ($60/year). The current spot rates are r(1) = 5% and r(2) = 4%.
Question 8. What is the price of this bond?
Question 9. What is the shape of the yield curve implied by these spot rates, and what does it typically signal?
Question 10. If both spot rates rise by 1% — to r(1) = 6% and r(2) = 5% — what happens to the bond's price, and why?
