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What can the buyer of a 6 x 12 FRA expect to receive (or pay) if the contracted rate is 10% and the settlement rate is 12%? Assume contract notional is $100m.
What can the buyer of a 6 x 12 FRA expect to receive (or pay) if the contracted rate is 10% and the settlement rate is 12%? Assume contract notional is $100m. A. Pay $1,000,000 B. Receive $1,000,000 C. Pay $943,396 D. Receive $943,396View AnswerAnswer: D Explanation: The buyer of...
Which of the following statements are true:
Which of the following statements are true: I. A credit default swap provides exposure to credit risk alone and none to credit spreads II. A CDS contract provides exposure to default risk and credit spreads III. A TRS can be used as a funding source by the party paying LIBOR...
What is the price of the put on the stock with the same exercise and strike as the call?
A stock sells for $100, and a call on the same stock for one year hence at a strike price of $100 goes for $35. What is the price of the put on the stock with the same exercise and strike as the call? Assume the stock pays dividends at...
Which of the following instruments can the company use to convert its fixed rate liability to a floating rate liability?
A company has a long term loan from a bank at a fixed rate of interest. It expects interest rates to go down. Which of the following instruments can the company use to convert its fixed rate liability to a floating rate liability?A . A fixed for floating interest rate...
What is the gamma of the corresponding put option?
The gamma of a call option is 0.08. What is the gamma of the corresponding put option?A . -0.08B . 0.92C . 0.08D . -0.92View AnswerAnswer: C Explanation: From the put-call parity, we know that Call - Put = Stock - Bank deposit. Since the bank deposit has a zero...
Backwardation can be explained by:
Backwardation can be explained by:A . expectations of oversupply in the futureB . convenience yields being greater than the total carrying costC . short term shortages in the spot marketsD . all of the aboveView AnswerAnswer: D Explanation: When forward prices are greater than the spot prices, the market is...
What is the fair price for a bond paying annual coupons at 5% and maturing in 5 years.
What is the fair price for a bond paying annual coupons at 5% and maturing in 5 years. Assume par value of $100 and the yield curve is flat at 6%.A . $104.33B . $95.79C . $100.00D . $94.73View AnswerAnswer: B Explanation: The coupon payments can be considered an annuity...
Which of the following is not a money market security
Which of the following is not a money market securityA . Treasury notesB . Treasury billsC . Bankers' acceptancesD . Commercial paperView AnswerAnswer: A Explanation: A money market security is one that is initially issued with a maturity of less than one year. Treasury bills are short-term government securities with...
According to the dividend discount model, if d be the dividend per share in perpetuity of a company and g its expected growth rate, what would the share price of the company be. 'r' is the discount rate.
According to the dividend discount model, if d be the dividend per share in perpetuity of a company and g its expected growth rate, what would the share price of the company be. 'r' is the discount rate.A . https://riskprep.com/images/stories/questions/123.01.a.pngB . https://riskprep.com/images/stories/questions/123.01.c.pngC . https://riskprep.com/images/stories/questions/123.01.d.pngD . https://riskprep.com/images/stories/questions/123.01.b.pngView AnswerAnswer: A Explanation: According...
[According to the PRMIA study guide for Exam 1, Simple Exotics and Convertible Bonds have been excluded from the syllabus. You may choose to ignore this question. It appears here solely because the Handbook continues to have these chapters.]
[According to the PRMIA study guide for Exam 1, Simple Exotics and Convertible Bonds have been excluded from the syllabus. You may choose to ignore this question. It appears here solely because the Handbook continues to have these chapters.] Which of the following statements relating to convertible debt are true:...
