37 CFA Level 3 Practice Exams 2015 Questions with Instant Answers on Fixed Income

Because the scope of CFA program is quite extensive and the recall of some topics may fade away over time, we highly recommend you spend the last few weeks taking CFA practice exams. Among of them is 37 CFA Level 3 Practice Exams 2015 Questions with Instant Answers on Fixed Income, a collection of exam-like questions, covering the most current curriculum that help build up your speed and confidence for the actual exam. These free CFA test questions give you the opportunity to test your own knowledge, improve time management skills and plan exam strategy. Interestingly, the grade test button at the bottom of last page is free to click so correct answers or detailed explanation will be delivered directly to learners. Thanks to it, you can check out your performance across each test and keep track of your exam study. Hope you fancy it and pass the next level exam.
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Duration is typically higher than the duration of an otherwise identical, but unleveraged, bond portfolio, given that the duration of liabilities is low relative to the duration of the assets they are financing.

• Duration of Equity with borrowed funds
• Duration of bond put option
• Duration of bond call option
• Duration effect with borrowing

Long a fixed-rate bond + Short a floating-rate bond

• From the perspective of the party who pays floating and receives fixed, the interest rate swap position can be viewed as
• The relationship between interest rated futures contract and interest rate
• The three main methods of currency hedging are:
• From the perspective of the party who pays floating and receives fixed, Dollar duration is

X − V(t)X=exercise priceV= Market value of bond at time t

• Duration of bond put option
• Binary credit put options pay off
• Binary credit put options
• Binary credit options

Default riskCredit spread riskDowngrade risk

• Binary credit options
• Bond hedged return
• Three types of credit risk
• Measures of portfolio risk

Physical transfer (costly)Bank account transfer (less costly than above, involve fees and charges)Deliver the sec to custodial account at seller account (minimum cost)

• Measures of portfolio risk
• Information ratio for fixed or equity manger
• Form of transfer agreement of securities in Repo
• One of the instrument to create leverage

Unhedged position exposed to price risk. Hedge position exposed to basis risk.Difference between cash price and future price.

• Not hedge vs Hedge and Price risk vs basis risk
• Three types of credit risk
• Bond hedged return
• Bond unhedged return

Duration for an option=Delta of optionxDuration of underlying instrumentx(Price of underlying)/ (Price of option instrument)D of option depends upon D of underlying, Delta and more on the last Price of underlying relative to price of option instrument (the higher the higher exposure to interest rate)

• Duration of an option can be calculated as
• Duration of bond call option
• Duration and interest rate expectation
• Duration of Equity with borrowed funds

Options can also be used by managers seeking to protect against a decline in reinvestment rates resulting from a drop in interest rates. The purchase of call options can be used in such situations. The sale of put options provides limited protection in much the same way that a covered call writing strategy does in protecting against a rise in interest rates.

• Covered call strategy
• Reinvestment rate protection stratgey
• Protective put strategy
• Measures of portfolio risk

When decision makers have strong convictions, a one-strategy approach may be optimal; in the more likely case of uncertainty, strategy combinations may produce the best expected risk/return trade-off.

• If decision makers have strong convictions than or otherwise
• Reinvestment rate protection stratgey
• Duration of an option can be calculated as
• Binary credit put options pay off

incorrect duration calculations, inaccurate projected basis values, inaccurate yield beta estimates

• Three types of credit risk
• Bond unhedged return
• Measures of portfolio risk
• Major sources of hedging errors are