Fixed income

Compared with an otherwise identical bond with no options attached, a bond that the issuer may redeem early at par is MOST likely to:

Mrs Chen pays 40% tax on interest, and gains on gilts are free of tax for her. She is comparing a low-coupon gilt priced well below par with a high-coupon gilt priced above par, both held to maturity. Which measure compares them BEST for her?

A rating analyst reviewing Cranmore plc finds operating profit (EBIT) of £48 million, EBITDA of £60 million, interest payable of £12 million, gross debt of £170 million and cash of £20 million. What are its interest cover and net debt to EBITDA?

A bond paying an annual coupon is priced at £104.20 and has a gross redemption yield of 5% and a Macaulay duration of 6.80 years. Using duration, its price if its yield rises by 0.75% is estimated at:

Mr Ellis buys a gilt for settlement during its ex-dividend period, a few days before a coupon date. Which statement is correct?

A 4% bond with five years to maturity has a clean price of £92.50 and a dirty price of £93.40 per £100 nominal. Its flat yield is closest to:

Alder Pension Fund holds a five-year floating rate note paying SONIA plus 0.80% a year, with the coupon reset every quarter. Which risk is the fund MOST exposed to?

A 4.5% gilt pays coupons on 7 March and 7 September. It is bought for settlement on 20 May at a clean price of £101.20 per £100 nominal, outside its ex-dividend period. There are 74 days from 7 March to 20 May and 184 days from 7 March to 7 September. The dirty price per £100 nominal is closest to:

A bond pays a 5% annual coupon, has exactly three years to maturity and is priced at £95.00 per £100 nominal. Its gross redemption yield is closest to:

Which statement BEST describes a UK index-linked gilt?

Short-term interest rates are expected to stay flat, yet the gilt yield curve slopes gently upward because investors want extra return for tying up money for longer. Which theory BEST explains this?

Ms Hughes pays 40% tax on interest. She is looking at a bond with a 5% annual coupon, exactly three years to maturity and a price of £95.00 (gross redemption yield 6.90%). Assume the gain on redemption is not taxed for her. Her net redemption yield is closest to:

The one-year and two-year spot rates are 4.0% and 4.8%, both annually compounded. A two-year bond pays a 5% annual coupon. Its arbitrage-free price per £100 nominal is closest to:

Just after Mr Ward buys a five-year fixed-coupon bond, market interest rates rise sharply and stay higher. Which statement about the effect on him is correct?

Under the pure expectations theory, what does a steeply upward-sloping yield curve indicate?

Mrs Patel buys a bond and holds it to maturity. Which list gives the components of her total return?

Which pairing of a bondholder's risk and a way of addressing it is correct?

On S&P Global Ratings' long-term issue rating scale, which is the HIGHEST rating classed as speculative grade (sub-investment grade)?

A 182-day UK Treasury bill is bought at £98.10 per £100 nominal and held to maturity. Using a 365-day year, what are its discount rate and its yield?

Hartley Asset Management buys £1,000,000 nominal of a UK Treasury bill with 91 days to maturity at a money market yield of 4.125%. Using the DMO's price/yield formula, the settlement proceeds are closest to: