Free CFA Level I Fixed Income Practice Questions

Fixed income on the CFA Level I exam covers bond pricing, yield measures, interest rate risk, credit analysis, and the term structure of interest rates. Weighted 11-14% (CFA Institute), making it one of the largest topics.

178 Questions
90 Easy
47 Medium
41 Hard
2026 Syllabus

Sample Questions

Question 1 Easy
A bond's coupon rate is the:
Solution
C is correct.

The coupon rate is the stated annual interest rate expressed as a percentage of the bond's par (face) value. It determines the fixed periodic coupon payments.
Question 2 Medium
Matrix pricing is most appropriately used to estimate the yield on which type of bond?
Solution
C is correct.

Matrix pricing is a method used to estimate the yield (or price) of a bond that does not trade frequently, by interpolating from the yields of bonds that have similar maturity, coupon, credit quality, and sector. It is most useful for thinly traded or newly issued bonds.
Question 3 Hard
The 1-year spot rate is 3.00%. A 2-year, 4% annual coupon bond with a par value of 100 trades at 101.50. Using bootstrapping, the 2-year spot rate is closest to:
Solution
B is correct. Discount the year-1 cash flow at the 1-year spot rate, then solve for the 2-year spot rate from the year-2 cash flow: 41.03+104(1+s2)2=101.50.\frac{4}{1.03} + \frac{104}{(1+s_2)^2} = 101.50. The first term equals 3.88353.8835, so 104(1+s2)2=97.6165\frac{104}{(1+s_2)^2} = 97.6165, giving (1+s2)2=1.06540(1+s_2)^2 = 1.06540 and s2=3.22%s_2 = 3.22\%.
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