Series 65 Quiz: Interpret Bond Yield Measures

What this quiz covers

This quiz focuses on Interpret Bond Yield Measures, giving you a quick way to practice the rules, question types, and explanations that matter most for Series 65.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

Question 1

1. $6.00\%$
2. $5.00\%$ (correct answer)
3. $7.20\%$
4. $12.00\%$

Question 2

1. The bond is trading at a discount and interest rates have risen.
2. The bond is trading at a premium and interest rates have fallen. (correct answer)
3. The bond is a zero-coupon bond held to maturity.
4. The bond is trading at par value.

Question 3

1. Current yield
2. Nominal yield
3. Yield to maturity (correct answer)
4. Yield to call

Question 4

1. Yield to maturity (correct answer)
2. Yield to call
3. Current yield
4. Coupon yield

Question 5

1. Yield to maturity
2. Yield to call
3. Current yield (correct answer)
4. Nominal yield

Question 6

1. A Treasury bond
2. A convertible bond
3. A Treasury STRIP (correct answer)
4. A floating-rate bond

Question 7

1. current yield.
2. coupon rate.
3. prime rate.
4. yield to maturity. (correct answer)

Question 8

1. Both the current yield and the YTM will increase.
2. The current yield will increase, while the YTM will decrease.
3. Both the current yield and the YTM will decrease. (correct answer)
4. The current yield will decrease, while the YTM will remain constant.

Question 9

1. Yield to maturity
2. Current yield
3. Yield to call (correct answer)
4. Nominal yield

Question 10

1. It is the annual interest payment a client will receive from the bond.
2. It is the rate of return earned on a bond if it is held to maturity, assuming all coupons are reinvested at that same rate. (correct answer)
3. It is the yield adjusted for the bond's potential to be called by the issuer prior to maturity.
4. It is the bond's annual coupon divided by its par value.

Question 11

1. Net Present Value (NPV)
2. Time-Weighted Return
3. Arithmetic Mean
4. Internal Rate of Return (IRR) (correct answer)

Question 12

1. only the annual coupon payments.
2. the semi-annual coupon payments and the capital gain at maturity.
3. the annual coupon payments and the amortized capital gain to maturity. (correct answer)
4. the effect of the bond being called prior to maturity.

Question 13

1. yield to maturity, as it represents the total return over the bond's full life.
2. yield to call, as it is the lower of YTM and YTC for a premium bond. (correct answer)
3. current yield, as it is simpler for the client to understand.
4. nominal yield, because it is fixed and guaranteed by the issuer.

Question 14

1. Coupon Rate, Current Yield, Yield to Maturity, Yield to Call (correct answer)
2. Yield to Call, Yield to Maturity, Current Yield, Coupon Rate
3. Current Yield, Coupon Rate, Yield to Maturity, Yield to Call
4. Yield to Maturity, Yield to Call, Coupon Rate, Current Yield

Question 15

1. $4.00\%$ using $40\div 1{,}000$.
2. $3.20\%$ using $40\div 1{,}250$.
3. $5.00\%$ using $40\div 800$. (correct answer)
4. $8.00\%$ because discount bonds double the coupon rate.

Question 16

1. YTM is greater than coupon because price equals par
2. YTM cannot be computed unless the bond is callable
3. YTM is always less than coupon regardless of price
4. YTM is approximately equal to coupon because price equals par (correct answer)

Question 17

1. $P=\sum_{t=1}^{n} \frac{C}{(1+r)^t}+\frac{F}{(1+r)^n}$ (correct answer)
2. $P=\sum_{t=1}^{n} C(1+r)^t+F(1+r)^n$
3. $P=\frac{C}{r}+\frac{F}{n}$
4. $P=\sum_{t=1}^{n} \frac{r}{(1+C)^t}+\frac{n}{(1+F)^n}$

Question 18

1. Discount rate typically rises, so present value generally falls (correct answer)
2. Discount rate typically falls, so present value generally rises
3. Coupon rate resets higher automatically, so price must rise
4. Par value increases, so price must increase proportionally

Question 19

1. Price rises because wider spreads imply higher quality
2. Price rises because YTM mechanically decreases when spreads widen
3. Price is unchanged because coupon payments are fixed
4. Price falls because required yield increases due to higher perceived credit risk (correct answer)

Question 20

1. The bond's coupon rate set at issuance
2. The required yield given market rates and credit risk (correct answer)
3. The bond's par value growth rate to maturity
4. The issuer's guaranteed earnings growth rate