Final quiz
The zero-coupon bond: assessment
Before you start
Twelve questions covering the six sections of the module. Click the answer of your choice. You can change your answers freely; the full answer key is revealed once you submit: every option, right or wrong, is explained, and for each question you miss a link takes you back to the relevant section of the course. Target: 9/12.
A zero-coupon bond with a nominal of 100 and a maturity of 5 years is quoted at 85 today and pays no coupon. Where does the return for the investor come from?
A 10-year ZC at 4%. The head calculation (100 − r × T) gives 60; the exact formula gives 67.03. What should be taken from that?
Which of these variables does not enter the price of a zero-coupon bond?
Market rates rise markedly. What happens to the price of a zero-coupon bond already held in a portfolio?
Two securities from the same issuer, maturity 10 years: a zero-coupon bond and a bond with annual coupons. Which one is more sensitive to a rise in rates?
What is an issuer's funding?
Which statement about funding and the CDS is correct?
Why was funding hardly a topic before 2008?
In the simulator, you bring the risk-free rate back to 0% and leave 40 bp of funding, maturity 5 years. What becomes of a 100% capital-guaranteed product?
5-year ZC at 3.3% = 85. Fees 2%. A 5-year at-the-money call costs 18%. What participation can the product offer?
In a yield product, which does not guarantee the capital, what role does the zero-coupon bond play?
An investor holds a 100% capital-guaranteed product at 10 years, issued when rates were at 1%. Two years later, rates are at 4% and their statement shows 74. What do you tell them?