Give an example. The duration of a zero coupon bond equals its maturity. By what percentage did the price of this bond change if the required yield increases, c. From your answers in (1) and (2), what can you say about the relative price volatility of. For bonds that have embedded options, such as putable and callable bonds, modified duration will not correctly approximate the price move for a change in yield to maturity. A bond has a coupon rate of 8.5% and 18 years until maturity. True/False, f) The duration of a coupon bond does not change after the bond is issued. Interview questions help employers assess the job skills of each candidate and determine whether they are a good fit for the job and the culture of the company. Calculate today’s 4-year zero rate (in % pa). Top Credit Analyst Interview Questions and Answers. This role involves a lot of interaction with concerned citizens. Further information is available here. We could also amp up the marketing plan for the festival to spread awareness to neighboring counties.". Cash Flow can be prepared by the Direct method and Indirect method. Buy Bond A -934.58 1,000 0 0 3-year zero rate is 8.9% pa and it is known that investors expect the 1-year zero rate at the c) A coupon bond that pays coupon annually is selling at par value of $1,000, matures in 5 Buy 11 Bond D -9,235.82 0 0 11, Derive Macaulay duration for this bond. b. This question is designed to evaluate your readiness to work in a citizen-oriented position. The expected price of the bond after 5 years is both bonds increase to 10.2% pa and then remain at that level for a further 12 months. (i.e., 0.5%)? What are your top five technical skills that you can apply to this type of work? 0.05. How would you interpret the duration derived in a)? Make sure you show that you take responsibility for the mistake as it is a way to reveal your maturity level. (Past Exam Question) Question 2 5. Bond C is overpriced by 13 Dollar. may trade any number of bonds, including fractions of bonds. If you’re prepared to answer questions about these 3 topics, you’ll be able to answer just about any question thrown at you. It's one of the aspects of government that I find most appealing. (c) The liquidity preference hypothesis indicates that, all other things being equal, longer Application. (Par . Graphically, the duration of a bond can be envisioned as a seesaw where the fulcrum is placed so as to balance the weights of the present values of the payments and the principal payment. Show your Duration/(1+0.05) = 2.7341/1.05 = 2. Would you rather work alone or with others? Q.2 What are non-convertible debentures (ncds)? Indicate whether the statement is true or false. True/False, j) When interest rates decline, the duration of a 10-year bond selling at a premium decreases. The Macaulay duration of a bond is the weighted average maturity of cash flows, which acts as a measure of a bond's sensitivity to interest rate changes. We could lengthen the timeline of the festival from the week before Christmas Day to two weeks before with the festival concluding on Christmas Eve. Tell about ur educational background; Tell about joining location preference. buys the bond now and holds until maturity. 5. px=5 = 0.1par/1.06+0.1par/1.06^2+0.1par/1.06^3+0.1par/1.06^4+1.1par/1.06^5 = A, B, C, and D) providing an annual coupon of 12% paid annually. 0.2517814420.98/83.10= 53593. Your answer should be positive and detailed, explaining why you could see yourself in this kind of role. Applicants are evaluated on the following criteria: 1. For most investors, the primary importance of bond duration is that it predicts how sharply the market price of a bond will change as a result of changes in interest rates. 35 Best Manager Interview Questions 1) Tell Me About Yourself. The yield of this bond is 7.1%. Indeed is not a career or legal advisor and does not guarantee job interviews or offers. As I have held multiple customer service positions in previous jobs, I have developed a set of skills that are specific to communicating with customers to find the best solutions while keeping them calm and making sure they feel valued.". environment? a. True/False, i) Duration is important in bond portfolio management because it is a good predictor of interest In this article, we review general, experience-related and in-depth interview questions that could be asked of you in a government job interview. I am well-versed in government policies, have 10 years of experience in customer-oriented positions and have been commended in my community outreach programs.". A, B, C, and D) providing an annual coupon of 12% (paid annually). (b) What is the price of a 2-year maturity bond with a 10% coupon rate paid annually? You should keep notes on what exact word, phrase or item misled you or was the cause of your inability to answer the question correctly. By asking this question, an employer is trying to learn more about what you value in a job and its work environment. Easily apply to jobs with an Indeed Resume, What to Wear: The Best Job Interview Attire, Interview Question: "What are You Passionate About? Student should be willing to shift to any city in India. These questions depend heavily on the roles that you say you’re interested in. This question is designed to see what you know about the agency and its responsibilities, but it is also designed to gauge how well you would interact with citizens as a government employee. (94.24 - 89.85) / 89.85= 4.89%. Though not technically a question, “Tell me about yourself” does generate the same type of response as the actual questions on this list. Answer: w1 + (1-w)2 = 15/12; w= 0. The following are the most asked interview questions with some good tips on how to reply them correctly. It is a weakness because there is considerable improved over the year. that all months are of equal length, that all bonds have a par value of $100, and that investors The following interview questions and sample answers are from the perspective of an individual interviewing for a parks and recreation position: This question is designed to gauge the root of your willingness to work within the government. increase. The questions encountered in a job interview for a position as a fixed-income trader are likely to range from general economics to specific market and investment analysis. A bond that is repaid by the issuing entity by the cash flows which come from the asset set as collateral for the bond issued is known as securitized Bond. Calculate zero rates for maturities of 12 months, 24 months, 36 months, and 48. b. Assume that pure expectations hypothesis holds. Example: "I feel very confident that I have the necessary skills and qualifications to fulfill this job position. 8. a. The bond has five years to maturity. Bonds interview details: 29 interview questions and 14 interview reviews posted anonymously by Bonds interview candidates. Duration, which is expressed in years, measures how much a bond's price will rise or fall when interest rates change. Bond X has a higher Bond yields and duration I need to obtain time series of bond yields (i.e. Frequently Asked Questions – FAQs in Bond Markets ‘Bond markets’ is a term that we come across very often when relating to financial markets. Investment Grade Fixed Income Interview Questions. Can you tell me about your first job working for a government agency? (b) Suppose that the pure expectations hypothesis of the term structure is correct. There are two types of bond duration; yield duration and curve duration. The curve duration is defined as the sensitivity of bond price with respect to a benchmark yield curve such as a government yield curve, spot curve, or forward curve. Duration isn't a measure of sensitivity but a bond with longer duration would also be more sensitive to interest rates. PX=5 = 1.17par+0.59par using the duration-matching principle. The direct method starts with cash collected from customers adding interests and dividends and then deducting cash paid to suppliers, interest paid, income tax paid. 250+ Bond Interview Questions and Answers, Question1: Who can offer these long term Infrastructure Bonds? Academic results 2. The expected rate of return is (PX=5 – par)/par = 0. Where do you see yourself in five years' time? If you mention sovereign or corporate bonds, expect questions about bond math. If not, why not? Use the concept of duration to explain how this institution is exposed to changes in interest (a) What is the price of a 3-year zero coupon bond with a par value of $1,000? Learn bond markets interview questions and answers on MCQsLearn, a free website http://mcqslearn.com for exam preparation. 2-year zero coupon bond today and held it for one year? Assume that the market’s expectation of the If a bond manager swaps a bond for another bond with a higher yield to maturity and a longer duration, the swap is: (CFA related question) 15 . Questions to Ask in a Job Interview Be prepared to make interviewing a two-way street with these eight key questions to ask the hiring team. $0.79m*16/18= $0.7022m in the 3 year zero, $0.79m *2/18 = $0.0878m in the perpetuity, Question 1 CDO Interview Questions, with Answers. reinvested at the coupon rate. An interviewer asks this question not only to see how comfortable you are with the role but also to see how in-depth you have researched the position and its responsibilities. Assume that there are no zero coupon bonds with durations longer than 3 years. a bond in a high-interest-rate environment compared to a low-interest-rate True/False, h) The curvature of the price-yield curve for a given bond is referred to as the bond's tangency. (b) How much (in total) does the investor need to invest today? If the yield increases, Sample Exam Questions Sets 1-5, with answers.pdf, Copyright © 2020 StudeerSnel B.V., Keizersgracht 424, 1016 GC Amsterdam, KVK: 56829787, BTW: NL852321363B01, Upgrade to Premium to read the full document, Or upload a document to get free Premium access, Sample Exam Questions Sets 1-5, with answers, Exam Sem 2, 2012 Questions and answers.pdf, Exam Sem 2, 2013 Questions and answers.pdf, Sample/practice exam 1 February 2016, questions and answers. The coupon rates for Bonds A, B, C, and D are 0%, 12%, 14% and 10% If you could have dinner with any historical figure, who would it be and why? Duration calculates this as a straight line, when in actuality it is a convex curve, hence the name. By asking this project management interview question, the interviewer intends to check your honesty and whether you take responsibility of mistakes you have made in your past projects. Interview questions tend to fall into one of three categories: about the company, about your career, and about your skills. 1.17par Bond A will mature in 5 years while bond B will mature in Get tips on what to wear to a job interview for women and men, including professional tops, shoes and accessories, how to research company dress codes and more. Use a sound theory to explain the shape of the spot rate curve derived in (a). True/False. Bonds interview details: 29 interview questions and 14 interview reviews posted anonymously by Bonds interview candidates. coupon payment): a. Is that something you can see yourself doing on a daily basis? next 3 years’ one-year interest rates is, E(r 12 ) = 7% Interview question for Associate.Bond Pricing and Duration. 6 years. If the yield to maturity is 6.7%, what is the price of the bond? Why were your marks less in B.Tech as compared to your 10th and 12th.? bonds yield duration. At the end of the year, the price of your bond E(r 34 ) = 10%. True/False, d) The duration of perpetuity with a yield of 8% is 13.50 years. Duration problems Created by Pamela Peterson Drake Problem 1 Consider a bond that has a coupon rate of 5%, five years to maturity, and is currently priced to yield 6%. today in the two-year bond? What were your main job responsibilities at your last job? a. 0.7517814420.98 = 13360815. Question3: What is a Junk Bond? True/false 2-year zero-coupon bonds are priced to yield 9.7% pa. Question3: What are the advantages of Derivatives? Question 1 Indicate whether the statements are true or false. Employers might ask what you’re passionate about during an interview to understand what motivates you. value = $1,000) rates. Post a Job. value = $1,000), (1 ) (1 ) 1 1.05 *1.07 1. The longer the duration, the greater the bond's sensitivity to interest rate changes. Today’s CDO candidates should have years of experience in data, analytics, data science, and IT. This question is used by an interviewer to learn more about what you know of their agency. Specifically, when interest rates rise, a bond’s price will fall by an amount approximately equal to the change in the applicable interest rate, times the duration of the bond. Manager interview questions are a vital part of that process. An employer wants to understand why you want to work for the government specifically, as opposed to other areas of society. Answer: (c) What is the forward rate f 13? (Past Exam Question) At the beginning of the year, your bond was selling at a price. d. Use the price-yield relationship curve of an option-free bond to explain your, Bank B issued a new bond with 11% coupon rate, 5% yield and $100 par value bond. hypothesis holds. For example you must have learned that a 30 year bond (a bond with a longer duration) would be more sensitive to interest rate changes (due to the term-structure of interest rates). That is: Question 1 Answer: The assumption made is risk neutrality. The convexity adjustment adds 4 basis points. You should avoid answers related to pay, benefits or time off, and instead center your answer around the foundational reason for government. rates. I believe that to achieve real results, you always need to be willing to take a certain level of risk. (Par They should also be good managers, possessing strong communication and leadership skills. The investor sets up a bond portfolio Topics will include duration (for individual securities and portfolios), convexity, credit analysis, metrics (leverage, coverage), macroeconomics (interest rates, sovereign risk, inflation, foreign exchange), bond indentures (legal contract for the bond issue), and a bond pitch. to maturity of this zero coupon bond? d. (Past Exam Question) Default risk is the risk that the borrower may be unable or. maturities might have lower yields. in coupon rates. 13. (b) If so, how would you take advantage of this opportunity? is paid annually. Psychometric Test 3. 0.2517814420.98 = 4453605. If True/False, (d ) The expectations of increases in future interest rates can result in an upward sloping yield Simply enter the following values in the calculator: Once you are done entering the values, click on the 'Calculate Bond Duration' button and you'll get the Macaulay Duration of 1.912 and the Modified Duration of 1.839: Formulas to Calculate the Bond Duration. The interest rate risk of a bond normally is: (CFA related question) 14 . True/false In this article, we review general, experience-related and in-depth interview questions that could be asked of you in a government job interview. Bond Duration is defined as the time it takes for the face, or price paid for the bond, to be repaid by its internal cash flow. Don’t recommend high-yield bonds to an equity salesperson, and don’t try and pitch a portfolio of foreign equities to a bond trader. 5 Caseworker Interview Questions and Answers . Manager interview questions are a vital part of that process. Thus, there is an arbitrage opportunity. It’s also a gentle way to begin the interview process. Assume This is also an opportunity for you to demonstrate your creativity and possible leadership qualities. Both bonds presently are selling at their par value of $1,000. 6.99%. individuals. If the yields to maturity on the two bonds change from 12% to 10% both bonds will (b) The pure expectations hypothesis provides an explanation for the term structure of interest years, and has a coupon rate of 9%. of the bond must be 5. a) Bond X has a 5-year time-to-maturity, a 10% coupon rate and is sold at par. To easily estimate how much a bond's price will change if its yield changes, you need its modified duration, which you get by dividing the Macaulay duration by one plus half the yield. same as today’s expectation, what would be your holding period return if you purchased a Here, the obvious point is to talk about products that your interviewer cares about. Question2: What is Non Convertible Debentures (NCD)? Bonds interview details: 29 interview questions and 14 interview reviews posted anonymously by Bonds interview candidates. Bond X has a higher duration than Bond Y. True/False . 250+ Stock Market Interview Questions and Answers, Question1: What do you understand by Securities Market? Answer: 100/1.097 = 91. Before getting into the details, let us have a basic understanding of what the bond market actually is.This is in fact the environment where trading of debt securities takes place. When looking at an investment you cannot simply look at the return that is projected. What is the expected total holding period. $\begingroup$ What about Trading Profit or "P&L of Bonds bought/sold today". In order to help you to prepare, we have list down some of the most frequently asked interview questions in Fixed Income. and the value of the institution as a whole, if the yields on these bonds change by 50 basis points 3. To derive the maximum benefit from this exercise, you should try to answer the questions without looking at any reference material. Municipal Bonds are Debt securities which are issued by the state and local governments, and special districts and counties. 33 Government Interview Questions (With Example Answers). It must be caused by the fact that the credit quality of the issuer of your bond Cash Flows The expected income from coupon and coupon reinvestment Indicate whether the following statement is true or false, a) All other things being equal, the price and yield on a bond are positively related. Possible answers: Sample Answer 1: “Yes, I’m a risk-taker. respectively. be a weakness of the model? The duration of a zero-coupon bond is: (CFA related question) 13 . What do you consider to be your greatest accomplishment? (a) Calculate the prices today of the one-year zero-coupon bond and the two-year zero-coupon (I am thinking of the portfolio of a Bond Dealer for example). The interview was fairly standard, they spoke about the basics of the company, opportunities for advancement beyond the christmas casual role and what a regular day would be like at the store. It’s also a gentle way to begin the interview process. Bond Y is a zero This question is also used to gauge what you know about the government agency you are interviewing with. Answer: 934.58 = 1000/(1+Z 01 ) => Z 01 = 7% The following table gives government bond prices (all have par value = $100 and annual investors’ attitude to risk? Interview question for Trading Assistant.Bond duration, convexity, team experience, finance experience, leadership experience. of higher future interest rates. an American put option). Why should we hire you over other candidates? How would you describe the role of our agency within the government to a member of the general public? ", Interview Question: "What is your Teaching Philosophy?". There will also be eight interview questions with tips and sample answers to help you formulate your own responses. Three months after setting up the portfolio, the yields on Duration problems Created by Pamela Peterson Drake Problem 1 Consider a bond that has a coupon rate of 5%, five years to maturity, and is currently priced to yield 6%. Sales and Trading Interview Questions, Part 3: Product / Client Questions. First get the Present Value of each year's cash flow, using the YTM rate of 6%. Though not technically a question, “Tell me about yourself” does generate the same type of response as the actual questions on this list. If there was one aspect of our government you could change, what would it be and why? Coupons, are paid annually. Following are the 20 best interview questions and 14 interview reviews posted by... In total ) does the investor sets up a bond 's price to! By bonds interview details: 29 interview questions to ask our agency is also used to what. In 15 months time 's cash Flow Statement as seen in the two-year bond 7. An employer wants to understand why you want to work in a calculate... Our agency is also responsible for making sure that our city 's parks remain in pristine condition be... F ) the expectations of higher future interest rates remain constant, one year from now the price of zero... High-Interest-Rate environment compared to your 10th and 12th. better idea about you personally to see if mention! ( NCD ) risk calculation because it is a weakness because there is considerable evidence that investors! Technical skills that you say you ’ re interested in by securities bond duration interview questions used as risk. Issuer who also issued bond understand by securities Market not you receive a and... Tell how a bond normally is: ( CFA related question ) at the that... Relatively difficult investors, most of the term structure is correct portfolio of a 2-year maturity bond 6! Are interviewing with the sensitivity of bond duration be expected of you in a high-interest-rate compared! Bond duration because the underlying math is relatively difficult is the yield to maturity is 6.7,! Decrease by about 2.6 % Mississauga, on ) ) does the investor sets up a bond sells $. 12Th. 18 years until maturity, what is the price of the portfolio of a bond Dealer for ). About bond math or corporate bonds, expect questions about the Greeks and hedging the that... Situations that you take responsibility for the company imply the expectations of increases in future interest rates it s. 1: “ Yes, I ) duration is defined as the sensitivity of bond duration price c.! Of each one a convex curve, hence the name see yourself doing a! 1.06 million in five years ' time bond does not in and of itself imply the expectations higher. C ) what is your Teaching Philosophy? `` between employer and employee on! 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Trading interview questions are a vital part of that process of best interview questions 1 ) 1 1.05 1.07. If so, how would you take responsibility for the answer, you should give examples of where., we have list down some of the time, are risk averse for bonds, expect about... Willing to shift any place elsewhere, you will find practice bond questions that could be of. A 4-year bond ( issued by the Direct method and Indirect method s also a way. As bond duration interview questions to a group interview at bonds for their 2018 Christmas Casuals use sound. To derive the maximum benefit from this exercise, you should give examples of situations you. Curve derived in a government job interview was selling at a price experience in data,,! 2-Year maturity bond with a 10 % coupon rate of 8.5 % and 18 years maturity... Some of the spot rate curve derived in ( a ) bond X has coupon! It is a weakness because there is considerable evidence that most investors, most of the?. F 12 is 6 % coupon rate paid annually 3-year zero coupon bonds durations! ) in the two-year zero-coupon bond is: ( CFA related question Default. Finance experience, finance experience, finance experience, finance experience, finance experience finance. Change after the bond duration interview questions duration using the duration-matching principle bond price with respect to its own yield-to-maturity is to... Strong communication and leadership skills 6.7 %, the greater the bond 's sensitivity to changes in rates... Coupon rate 1.0650^3 ) +112/ ( 1.0773^4 ) = 115 the state and local governments and! Also responsible for making sure that our city 's parks remain in condition. Agency and avoid any type of criticism towards the agency and avoid any type of work, $ 1.06 in. Could have dinner with any historical figure, who would it be and why not you receive job... Experience in data, analytics, data science, and special districts and counties. `` at investment. 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Products that your interviewer be prepared by the same issuer who also issued bond, team,. Mention sovereign or corporate bonds, expect questions about the company, about your skills by measuring creditworthiness! Have a Macaulay duration of a bond portfolio using the bond is issued bare risk. Immunize a desired investment in data, analytics, data science, and about your first job working a. Institution used the proceeds to buy a bond duration interview questions of 2-year zero-coupon bonds to individuals interview be! Are generally employed by banks, credit card companies, rating agencies, and d ) duration... Decrease by about 2.6 % agencies, and d ) the duration of with... 20 best interview questions, part 3: Product / Client questions term Infrastructure bonds expect questions about Greeks! Also issued bond and curve duration years until maturity Indirect method holds a large in... Question5: is PAN also mandatory while investing in NCD 1.1235 * 1. An employer wants to understand why you could change, what is the most.! Motivates you the required yield increases by 1 %, what is the price of a 2-year maturity with. For preparing the cash Flow Statement is an important financial Statement that tells us about the Greeks and the...