1) A financial instrument is structured such that cash flows to the security holder increase if a specified reference rate increases. This structured financial instrument is best described as:

a.a yield enhancement instrument.

b.a participation instrument.

c.a capital protected instrument.

2) Which of the following statement is least accurate?

a.A Conventional mortgage is an example of an amortizing loan

b.Sinking fund provisions provide for the repayment of principal through a series of payments over the life of the issue

c.Call provisions give the issuer the right and the obligation to retire all or a part of an issue prior to maturity

3) Floating-rate bonds are issued by national governments as the best way to reduce:

a.inflation risk.

b.interest rate risk.

c.credit risk.

4)

A financial instrument is structured such that cash flows to the security holder increase if a specified reference rate increases. This structured financial instrument is best described as:

a.

a yield enhancement instrument.

b.

a participation instrument.

c.

a capital protected instrument.

5)

An analyst who describes a fixed-income security as being a structured finance instrument is classifying the security by:

a.

taxable status.

b.

type of issuer.

c.

credit quality.

6)

Which of the following statements relating to commercial paper is most accurate? Companies issue commercial paper:

a.

only for funding working capital.

b.

only as an interim source of financing.

c.

both for funding working capital and as an interim source of funding.

7)

Securitization benefits financial markets by:

a.

allowing investors to tailor credit risk and interest rate risk exposures to meet their individual needs.

b.

establishing a barrier between investors and originating borrowers.

c.

increasing the role of intermediaries.

8)

In the context of mortgage-backed securities, a conditional prepayment rate (CPR) of 8% means that approximately 8% of the outstanding mortgage pool balance at the beginning of the year is expected to be prepaid:

a.

in the current month.

b.

by the end of the year.

c.

over the life of the mortgages.