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Study Session 15: Fixed Income: Basic Concepts

Schweser Practice Exam - Exam 3 Afternoon

Hi guys,

I got a question here relating to a practice q… i think they have something wrong here:

Debt covenants to protect bold holders are least likely to:

a) restrict issuance of new debt

b) require sinking fund redemptions

c) prohibit bond repurchases at premium to par

The answer they have listed here is C.. I’ve gone with A:

EAR vs EAY?

what’s the difference between effective annual yield and effective annual rate?

call vs refund

What’s the difference between refunding and call?

How can a bond be nonrefundable but callable?

Help with Elan Q (Annuity PV)

Hi Guys,

Can you help me out with a problem I have?

Q: An annuity pays 12k every year for 5 years with the first payment at the end of Year 4. Given a 13% discount rate, the PV is?

a) 42,207

b) 29,251

c) 28,334


1st step: Calc PV at beginning of year 4: -> 42,207

2nd step: FV 42,207, PMT 0, I/Y 13, N 4 -> 25,886

Elan uses N=3, I dont see why?

Please help me out here!