CFM — Certificate in Financial Markets Bond Practice Questions
The free CFM — Certificate in Financial Markets questions that deal with bond, with answers and explanations. The full bank and the timed practice test cover every topic the exam asks about.
Question #2
If a bond is trading at a discount, what does that indicate about the bond's coupon rate compared to its yield?
Correct answer: A
Explanation
A bond trading at a discount has a coupon rate that is less than its yield to maturity because investors require a higher return.
Question #4
What happens to the price of a bond when interest rates rise?
Correct answer: B
Explanation
When interest rates rise, existing bond prices fall because their fixed coupon payments become less attractive compared to new bonds issued at higher rates.
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