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Advanced Wealth Management Course (IIBF) - Paper 3
Part II: Ch 14: The Yield Curve
Q1.
(I) Yield to Maturity is especially important when looking at zero-coupon bonds. (II) A yield curve depicts the relationship between time and yield of a homogeneous risk class of securities.
Q2.
A “positive” yield curve is one in which long-term maturities have lower yields than short-term maturities.
Q3.
(I) A “positively slopped” yield curve usually indicates that Reserve Bank is engaged in a strategy to slow the economy by raising short-term interest rates. (II) Yield to Maturity measures the total income earned by an investor over the entire tenor of the security.
Q4.
Factor/s affecting a yield curve is/are:
Q5.
Assume that a ZCB (face value of Rs. 100) with a six months maturity is currently being traded @ 96.50/- . What would be the 6 month zero coupon rate?
Q6.
(I) The liquidity premium theory asserts that long-term yields should average higher than short-term yields. (II) Bootstrapping is an iterative process of generating a Zero Coupon Yield curve from the observed prices/yields of coupon bearing securities.
Q7.
The expectations theory asserts that the yield curve is composed of a series of somewhat independent maturity segments.
Q8.
(I) The segmentation theory asserts that long-term yields are the average of the short-term yields prevailing during the intervening period. (II) A neutral yield curve is that which has a zero slope.
Q9.
The factor/s which can result in yield curves departing from their “normal shapes” is/are:
Q10.
For a given bond issuer, the structure of yields for bonds with different terms to maturity is called the term structure of interest rates.

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