QUESTION: 93 Exam Topic: 1 Volume A

Beta Insurance Company is only allowed to invest in investment grade bonds. To maximize the interest income, Beta Insurance Company should invest in bonds with which of the following ratings?

Answer(s): C

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QUESTION: 94 Exam Topic: 1 Volume A

Which one of the following four statements on the seniority of corporate bonds is incorrect?

Senior bonds typically have lower credit spreads than junior bonds with the same maturity and payment characteristics.
Seniority refers to the priority of a bond in bankruptcy.
Junior bonds always pay higher coupons than subordinated bonds.
In bankruptcy, holders of senior bonds are paid in full before any holders of subordinated bonds receive payment.

Answer(s): C

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QUESTION: 95 Exam Topic: 1 Volume A

Which of the following statements regarding bonds is correct?

I) Interest rates on bonds are typically stated on an annualized rate.
II) Bonds can pay floating coupons that are directly linked to various interest rate indices.
III) Convertible bonds have an element of prepayment risk.
IV) Callable bonds have an element of equity risk.