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Key Facts: CISI Bonds and Fixed Income Exam

100

Exam Questions

CISI Syllabus

70%

Passing Score

70/100 correct

2 hours

Time Limit

Official Exam

£225

Exam Fee

CISI Price list

65%

Pass Rate

Estimated

80-100h

Study Time

Recommended

The CISI Bonds and Fixed Income exam contains 100 multiple-choice questions with a 2-hour time limit. The passing mark is 70%. It covers government and corporate bonds, yields, and risk analysis. The unit forms part of the CISI Capital Markets Programme, a globally recognized certification path.

Sample CISI Bonds and Fixed Income Practice Questions

Try these sample questions to test your CISI Bonds and Fixed Income exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1What does the par value (or nominal value) of a conventional bond represent?
A.The market price at which the bond is currently trading
B.The principal amount that the issuer agrees to repay to the bondholder at maturity
C.The total amount of interest payments the bondholder receives over the bond's life
D.The value of the bond adjusted for cumulative inflation since its issuance date
Explanation: The par value (also known as nominal, face, or principal value) is the amount the bond issuer promises to repay to the lender at the end of the bond's term (maturity). It is also the basis upon which coupon payments are calculated.
2The coupon rate of a bond is defined as the:
A.Annual interest payment divided by the current market price of the bond
B.Total return expected on the bond if held until its maturity date
C.Annual interest payment expressed as a percentage of the bond's nominal value
D.Discount rate that equates the present value of cash flows to the bond's price
Explanation: The coupon rate is the nominal interest rate set at issuance, calculated as the annual interest payment divided by the nominal (par) value of the bond. It does not change with market price fluctuations.
3If market interest rates rise, what is the typical effect on the price of existing fixed-rate bonds?
A.The prices of existing bonds will increase to match the higher interest rates
B.The prices of existing bonds will decrease to offer a competitive yield
C.The prices of existing bonds will remain unchanged as the coupon rate is fixed
D.The prices of existing bonds will become volatile but experience no net change
Explanation: According to the inverse relationship between bond prices and interest rates, when market interest rates rise, existing fixed-rate bonds become less attractive because they pay lower coupons than new bonds. Consequently, their market prices must fall to increase their yield to a level competitive with current market rates.
4Which of the following describes the key characteristic of a zero-coupon bond?
A.It pays interest at a floating rate that resets to zero if benchmarks fall
B.It pays no periodic interest and is issued at a deep discount to its par value
C.It provides tax-free interest payments that are rolled up and paid at maturity
D.It pays regular coupons, but they are reinvested in equity shares of the issuer
Explanation: Zero-coupon bonds do not make regular interest (coupon) payments. Instead, they are issued at a price significantly below their nominal value (a deep discount) and are redeemed at par at maturity, with the capital appreciation representing the investor's return.
5A callable bond gives the:
A.Bondholder the right to sell the bond back to the issuer before maturity at a set price
B.Issuer the right to redeem the bond prior to its scheduled maturity date at a set price
C.Bondholder the right to convert the bond into a pre-specified number of ordinary shares
D.Issuer the right to increase the coupon rate if the company's credit rating drops
Explanation: A callable bond contains an embedded call option that grants the issuer the right, but not the obligation, to buy back (redeem) the bond from the bondholders before the scheduled maturity date, typically during periods of falling interest rates.
6Under what market conditions is a bondholder most likely to exercise the option embedded in a puttable bond?
A.When market interest rates are falling, making the bond's coupon highly attractive
B.When market interest rates are rising, allowing them to reinvest capital at higher rates
C.When the issuer's credit rating improves, driving the bond's price above the put price
D.When the bond market becomes highly liquid, reducing the bid-ask spreads
Explanation: A put option allows the bondholder to sell the bond back to the issuer at a specified put price (typically par) before maturity. If interest rates rise, bond prices fall; the holder can exercise the put option to receive par value and reinvest that capital in new, higher-yielding securities.
7A bond has a nominal value of £100, a coupon rate of 5% per annum, and is currently trading at a clean price of £80. What is its flat (running) yield?
A.4.00%
B.5.00%
C.6.25%
D.8.00%
Explanation: The flat yield (also called running or current yield) is calculated as: `(Annual Coupon Payment / Market Clean Price) * 100`. Here, the annual coupon is 5% of £100 = £5. Thus, flat yield = `(£5 / £80) * 100 = 6.25%`.
8A dual currency bond is most accurately described as a debt instrument that:
A.Allows the investor to choose the payment currency at each coupon date
B.Pays coupon interest in one currency and principal repayment in another currency
C.Has its principal amount linked to a basket of multiple foreign currencies
D.Pays interest and principal in a domestic currency but is exempt from local exchange controls
Explanation: A dual currency bond specifies interest (coupon) payments in one currency (e.g., Japanese Yen) and the principal repayment at maturity in a different currency (e.g., US Dollars). The coupon rate and exchange rate are typically fixed at issuance.
9When stripping a conventional coupon-bearing bond, how do Principal-Only (PO) strips differ from Interest-Only (IO) strips?
A.PO strips pay interest at a variable rate, while IO strips pay no interest
B.PO strips are created from the final redemption payment, whereas IO strips are created from the periodic coupon payments
C.PO strips are sold only to retail investors, while IO strips are restricted to market makers
D.PO strips have shorter durations than the underlying bond, whereas IO strips have longer durations
Explanation: Stripping a bond involves separating its cash flows. The single payment of the principal at maturity becomes the Principal-Only (PO) strip (essentially a zero-coupon bond maturing on the redemption date), while each scheduled coupon payment becomes an individual Interest-Only (IO) strip.
10Which of the following is a primary characteristic of a perpetual bond (such as a Consol)?
A.It must be redeemed by the issuer within 5 years of issuance
B.It has no fixed maturity date and pays coupon interest indefinitely
C.Its coupon rate is adjusted annually to match index-linked gilts
D.It pays no coupon interest but guarantees double the principal at maturity
Explanation: Perpetual bonds (or Consols in the UK) have no defined maturity date. The issuer is not obligated to redeem the principal; instead, the bond pays coupon interest indefinitely (though many have call features allowing the issuer to redeem them if desired).

About the CISI Bonds and Fixed Income Exam

The CISI Bonds and Fixed Income exam assesses key concepts of debt instruments, including UK Gilts, corporate debt, valuation mechanics, flat and redemption yields, and risk metrics.

Questions

100 scored questions

Time Limit

2 hours

Passing Score

70%

Exam Fee

£225 (CISI)

CISI Bonds and Fixed Income Exam Content Outline

20%

Bond Fundamentals & Characteristics

Core bond features, coupon structures, flat yields, and dual currency bonds.

25%

Government Bonds & Gilt Market

UK conventional and index-linked Gilts, Treasury Bills, auction processes, and repo markets.

25%

Corporate Bonds & Credit Risk

Corporate debentures, bond covenants, credit ratings, credit spreads, and convertible bonds.

15%

Bond Valuation & Pricing Mechanics

Discounting, clean vs. dirty prices, accrued interest, YTM, and bootstrapping.

15%

Portfolio Management & Risk Metrics

Macaulay/modified duration, convexity, reinvestment risk, yield curves, and immunization.

How to Pass the CISI Bonds and Fixed Income Exam

What You Need to Know

  • Passing score: 70%
  • Exam length: 100 questions
  • Time limit: 2 hours
  • Exam fee: £225

Keys to Passing

  • Complete 500+ practice questions
  • Score 80%+ consistently before scheduling
  • Focus on highest-weighted sections
  • Use our AI tutor for tough concepts

CISI Bonds and Fixed Income Study Tips from Top Performers

1Practice calculations for flat yield, accrued interest, and zero-coupon bond pricing.
2Understand the mechanics of UK Gilts, including index-linked lags, and the roles of the DMO and GEMMs.
3Master credit rating scales (Moody's vs. S&P/Fitch) and the boundary of investment grade.
4Understand Macaulay and modified duration, particularly their relationship with bond price sensitivity.
5Take time to study the shape of yield curves and the underlying theories of term structure.

Frequently Asked Questions

What is the format of the CISI Bonds and Fixed Income exam?

The exam is a computer-based assessment (CBA) consisting of 100 multiple-choice questions. Candidates are given 2 hours to complete the test, and the passing mark is 70%.

What topics are covered in the CISI Bonds and Fixed Income syllabus?

The syllabus covers five main areas: Bond Fundamentals and Characteristics (20%), Government Bonds and Gilt Markets (25%), Corporate Bonds and Credit Risk (25%), Bond Valuation and Pricing Mechanics (15%), and Portfolio Management and Risk Metrics (15%).

How much does it cost to take the CISI Bonds and Fixed Income exam?

The individual technical unit exam fee is approximately £225. Candidates can also buy package deals (Saver packages) from the CISI that bundle the exam, workbook, and digital learning assets.

What is the passing score for the CISI Bonds and Fixed Income exam?

The passing score is 70%, which means you need to answer at least 70 out of 100 questions correctly to pass.

Is the CISI Bonds and Fixed Income exam part of a larger qualification?

Yes, it is a technical unit under the CISI Capital Markets Programme and the Investment Operations Certificate (IOC). Passing it along with a regulatory paper leads to a full certificate.