1. Coupon reinvestment risk dominates price risk when a. Investment horizon > Ma

Question

1. Coupon reinvestment risk dominates price risk when

a. Investment horizon > MacAulay Duration

b. Investment horizon < MacAulay Duration

c. Investment horizon = MacAulay Duration

2. The two KEY components of credit risk are – select 2

a. Spread risk

b. Default risk

c. Downgrade risk

d. Loss severity

3. Place the following in order of claims seniority

a. First lien

b. Junior subordinated

c. Senior secured

d. Subordinated

e. Senior subordinated

f. Senior unsecured

4. Which is NOT one of the 4 C’s of credit analysis

a. Capacity

b. Collection

c. Collateral

d. Covenants

e. Character

Explanation / Answer

1 Investment horizon>Macaulay Duration
2 default risk and downgrade risk
3 first lien, senior secured, senior unsecured, senior subordinated, junior subordinated
4 collection

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