Question 1

A fixed income analyst is least likely to conduct an independent analysis of credit risk because credit rating agencies:

Accepted Answer

A)  may at times mis-rate issues. 
B)  often lag the market in pricing credit risk. 
C)  cannot foresee future debt-financed acquisitions. 
A)  may at times mis-rate issues. 
B)  often lag the market in pricing credit risk. 
C)  cannot foresee future debt-financed acquisitions.

Question 2

The factor that most likely results in corporate credit spreads widening is:

Accepted Answer

A)  an improving credit cycle. 
B)  weakening economic conditions. 
C)  a period of high demand for bonds. 
A)  an improving credit cycle. 
B)  weakening economic conditions. 
C)  a period of high demand for bonds.

Question 3

Which industry characteristic most likely has a positive effect on a company's ability to service debt?

Accepted Answer

A)  low barriers to entry in the industry 
B)  High number of suppliers to the industry 
C)  broadly dispersed market share among large number of companies in the industry 
A)  low barriers to entry in the industry 
B)  High number of suppliers to the industry 
C)  broadly dispersed market share among large number of companies in the industry

Question 4

Credit spreads are most likely to widen:

Accepted Answer

A)  in a strengthening economy. 
B)  as the credit cycle improves. 
C)  in periods of heavy new issue supply and low borrower demand. 
A)  in a strengthening economy. 
B)  as the credit cycle improves. 
C)  in periods of heavy new issue supply and low borrower demand.

Question 5

Which of the following corporate debt instruments has the highest seniority ranking?

Accepted Answer

A)  Second lien 
B)  Senior unsecured 
C)  Senior subordinated 
A)  Second lien 
B)  Senior unsecured 
C)  Senior subordinated

Question 6

An issuer credit rating usually applies to a company's:

Accepted Answer

A)  secured debt. 
B)  subordinated debt. 
C)  senior unsecured debt. 
A)  secured debt. 
B)  subordinated debt. 
C)  senior unsecured debt.

Question 7

based on the information in Exhibit 2, Grupa Zywiec SA's credit risk is most likely: ExHibiT 2 European Food, beverage, and Tobacco industry and Grupa Zywiec SA Selected Financial Ratios for 2010
$\begin{array} { l c c c c c } 
& \begin{array} { c } 
\text { Total } \
\text { debt/Total } \
\text { capital } \
( \% )
\end{array} & \begin{array} { c } 
\text { FFO/Total } \
\text { debt } \
( \% )
\end{array} & \begin{array} { c } 
\text { Return on } \
\text { capital } \
( \% )
\end{array} & \begin{array} { c } 
\text { Total debt/ } \
\text { EBITDA } \
( \mathrm { x } )
\end{array} & \begin{array} { c } 
\text { EBITDA } \
\text { interest } \
\text { coverage } \
( \mathrm { x } )
\end{array} \
\hline \text { Grupa Zywiec SA } & 47.1 & 77.5 & 19.6 & 1.2 & 17.7 \
\text { Industry Median } & \mathbf { 4 2 . 4 } & \mathbf { 2 3 . 6 } & \mathbf { 6 . 5 5 } & \mathbf { 2 . 8 5 } & \mathbf { 6 . 4 5 } \
\hline
\end{array}$

Accepted Answer

A)  lower than the industry. 
B)  higher than the industry. 
C)  the same as the industry. 
A)  lower than the industry. 
B)  higher than the industry. 
C)  the same as the industry.

Question 8

For a high-quality debt issuer with a large amount of publicly traded debt, bond investors tend to devote most effort to assessing the issuer's:

Accepted Answer

A)  default risk. 
B)  loss severity. 
C)  market liquidity risk. 
A)  default risk. 
B)  loss severity. 
C)  market liquidity risk.

Question 9

during bankruptcy proceedings of a firm, the priority of claims was not strictly adhered to. Which of the following is the least likely explanation for this outcome?

Accepted Answer

A)  Senior creditors compromised. 
B)  The value of secured assets was less than the amount of the claims. 
C)  A judge's order resulted in actual claims not adhering to strict priority of claims. 
A)  Senior creditors compromised. 
B)  The value of secured assets was less than the amount of the claims. 
C)  A judge's order resulted in actual claims not adhering to strict priority of claims.

Question 10

The risk that a bond's creditworthiness declines is best described by:

Accepted Answer

A)  credit migration risk. 
B)  market liquidity risk. 
C)  spread widening risk. 
A)  credit migration risk. 
B)  market liquidity risk. 
C)  spread widening risk.

Question 11

Use the following Exhibit for Questions 39 and 40
ExHibiT 4 industrial Comparative Ratio Analysis, year 20xx
  
-based on only the leverage ratios in Exhibit 4, the company with the highest credit risk is:

Accepted Answer

A)  Company A. 
B)  Company b. 
C)  Company C. 
A)  Company A. 
B)  Company b. 
C)  Company C.

Question 12

in order to analyze the collateral of a company a credit analyst should assess the:

Accepted Answer

A)  cash flows of the company. 
B)  soundness of management's strategy. 
C)  value of the company's assets in relation to the level of debt. 
A)  cash flows of the company. 
B)  soundness of management's strategy. 
C)  value of the company's assets in relation to the level of debt.

Question 13

A senior unsecured credit instrument holds a higher priority of claims than one ranked as:

Accepted Answer

A)  mortgage debt. 
B)  second lien loan. 
C)  senior subordinated. 
A)  mortgage debt. 
B)  second lien loan. 
C)  senior subordinated.

Question 14

The risk that the price at which investors can actually transact differs from the quoted price in the market is called:

Accepted Answer

A)  spread risk. 
B)  credit migration risk. 
C)  market liquidity risk. 
A)  spread risk. 
B)  credit migration risk. 
C)  market liquidity risk.

Question 15

in credit analysis, capacity is best described as the:

Accepted Answer

A)  quality of management. 
B)  ability of the borrower to make its debt payments on time. 
C)  quality and value of the assets supporting an issuer's indebtedness. 
A)  quality of management. 
B)  ability of the borrower to make its debt payments on time. 
C)  quality and value of the assets supporting an issuer's indebtedness.

Question 16

loss severity is best described as the:

Accepted Answer

A)  default probability multiplied by the loss given default. 
B)  portion of a bond's value recovered by bondholders in the event of default. 
C)  portion of a bond's value, including unpaid interest, an investor loses in the event of default. 
A)  default probability multiplied by the loss given default. 
B)  portion of a bond's value recovered by bondholders in the event of default. 
C)  portion of a bond's value, including unpaid interest, an investor loses in the event of default.

Question 17

- Depreciation and amortization: $€ 249$ million
- Total assets: $€ 10,618$ million
- Total debt: $€ 1,613$ million
- Shareholders' equity: $€ 4,616$ million
The debt/capital ratio of Adidas AG is closest to:
A. 15.19\%.
B. $25.90 \%$.
C. $34.94 \%$.

Accepted Answer

The answer of - Depreciation and amortization: $€ 249$ million
-...

Question 18

The process of moving credit ratings of different issues up or down from the issuer rating in response to different payment priorities is best described as:

Accepted Answer

A)  notching. 
B)  structural subordination. 
C)  cross-default provisions. 
A)  notching. 
B)  structural subordination. 
C)  cross-default provisions.

Question 19

Credit risk of a corporate bond is best described as the:

Accepted Answer

A)  risk that an issuer's creditworthiness deteriorates. 
B)  probability that the issuer fails to make full and timely payments. 
C)  risk of loss resulting from the issuer failing to make full and timely payments. 
A)  risk that an issuer's creditworthiness deteriorates. 
B)  probability that the issuer fails to make full and timely payments. 
C)  risk of loss resulting from the issuer failing to make full and timely payments.

Question 20

in a bankruptcy proceeding, when the absolute priority of claims is enforced:

Accepted Answer

A)  senior subordinated creditors rank above second lien holders. 
B)  preferred equity shareholders rank above unsecured creditors. 
C)  creditors with a secured claim have the first right to the value of that specific property. 
A)  senior subordinated creditors rank above second lien holders. 
B)  preferred equity shareholders rank above unsecured creditors. 
C)  creditors with a secured claim have the first right to the value of that specific property.

A fixed income analyst is least likely to conduct an independent analysis of credit risk because credit rating agencies:

The factor that most likely results in corporate credit spreads widening is:

Which industry characteristic most likely has a positive effect on a company's ability to service debt?

Credit spreads are most likely to widen:

Which of the following corporate debt instruments has the highest seniority ranking?

An issuer credit rating usually applies to a company's:

For a high-quality debt issuer with a large amount of publicly traded debt, bond investors tend to devote most effort to assessing the issuer's:

during bankruptcy proceedings of a firm, the priority of claims was not strictly adhered to. Which of the following is the least likely explanation for this outcome?

The risk that a bond's creditworthiness declines is best described by:

Use the following Exhibit for Questions 39 and 40 ExHibiT 4 industrial Comparative Ratio Analysis, year 20xx -based on only the leverage ratios in Exhibit 4, the company with the highest credit risk is:

in order to analyze the collateral of a company a credit analyst should assess the:

A senior unsecured credit instrument holds a higher priority of claims than one ranked as:

The risk that the price at which investors can actually transact differs from the quoted price in the market is called:

in credit analysis, capacity is best described as the:

loss severity is best described as the:

- Depreciation and amortization: $€ 249$ million - Total assets: $€ 10,618$ million - Total debt: $€ 1,613$ million - Shareholders' equity: $€ 4,616$ million The debt/capital ratio of Adidas AG is closest to: A. 15.19\%. B. $25.90 \%$ . C. $34.94 \%$ .

The process of moving credit ratings of different issues up or down from the issuer rating in response to different payment priorities is best described as:

Credit risk of a corporate bond is best described as the:

in a bankruptcy proceeding, when the absolute priority of claims is enforced:

Fixed-Income Securities: Defining Elements

Fixed-Income Markets: Issuance, Trading, and Funding

Introduction to Fixed-Income Valuation

Introduction to Asset-Backed Securities

Understanding Fixed Income Risk and Return

The Term Structure and Interest Rate Dynamics

The Arbitrage-Free Valuation Framework

Valuation and Analysis of Bonds With Embedded Options

Credit Analysis Models

Credit Default Swaps

Overview of Fixed-Income Portfolio Management

Liability-Driven and Index-Based Strategies

Yield Curve Strategies

Fixed-Income Active Management: Credit Strategies

Filters

Exam 6: Fundamentals of Credit Analysis

A fixed income analyst is least likely to conduct an independent analysis of credit risk because credit rating agencies:

The factor that most likely results in corporate credit spreads widening is:

Which industry characteristic most likely has a positive effect on a company's ability to service debt?

Credit spreads are most likely to widen:

Which of the following corporate debt instruments has the highest seniority ranking?

An issuer credit rating usually applies to a company's:

For a high-quality debt issuer with a large amount of publicly traded debt, bond investors tend to devote most effort to assessing the issuer's:

during bankruptcy proceedings of a firm, the priority of claims was not strictly adhered to. Which of the following is the least likely explanation for this outcome?

The risk that a bond's creditworthiness declines is best described by:

Use the following Exhibit for Questions 39 and 40 ExHibiT 4 industrial Comparative Ratio Analysis, year 20xx -based on only the leverage ratios in Exhibit 4, the company with the highest credit risk is:

in order to analyze the collateral of a company a credit analyst should assess the:

A senior unsecured credit instrument holds a higher priority of claims than one ranked as:

The risk that the price at which investors can actually transact differs from the quoted price in the market is called:

in credit analysis, capacity is best described as the:

loss severity is best described as the:

The process of moving credit ratings of different issues up or down from the issuer rating in response to different payment priorities is best described as:

Credit risk of a corporate bond is best described as the:

in a bankruptcy proceeding, when the absolute priority of claims is enforced:

Fixed-Income Securities: Defining Elements

Fixed-Income Markets: Issuance, Trading, and Funding

Introduction to Fixed-Income Valuation

Introduction to Asset-Backed Securities

Understanding Fixed Income Risk and Return

The Term Structure and Interest Rate Dynamics

The Arbitrage-Free Valuation Framework

Valuation and Analysis of Bonds With Embedded Options

Credit Analysis Models

Credit Default Swaps

Overview of Fixed-Income Portfolio Management

Liability-Driven and Index-Based Strategies

Yield Curve Strategies

Fixed-Income Active Management: Credit Strategies

Filters