PASS PRO Questions
1.
Consider the market environment in which 1-year swaps are yielding 4% and have a duration of
approximately 0.95. A 1-year inverse floater with a coupon of 12% - 3-month LIBOR has been
just reset and is trading at par. The duration of this inverse floater will be CLOSEST to:
A. 0.00.
B. 1.90.
C. 2.35.
D. 2.85.
2.
Which of the following securities is likely to experience the greatest fall in price with a rise in
interest rates (assuming that all of them have the same maturity and are currently priced to
par)?
A. Zero coupon bond.
B. Fixed coupon bond (7% coupon).
C. Floating-rate note (3-month LIBOR)
D. Inverse floater (14% - 3-month LIBOR).
3.
In a stable flat yield curve environment, the price of a fixed coupon bond trading at a premium
will:
A. fall with time.
B. rise with time.
C. not change with time.
D. first rise and then fall with time.

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