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Which of the following option strategies would suit him?
An investor has a bullish outlook on the market. Which of the following option strategies would suit him? I. Risk reversal II. Collar III. Bull spread IV. Butterfly spreadA . II and IVB . I, III and IVC . I and IIID . I, II, III and IVView AnswerAnswer: C...
Which of the following are true:
Which of the following are true: I. A interest rate cap is effectively a call option on an underlying interest rate II. The premium on a cap is determined by the volatility of the underlying rate III. A collar is more expensive than a cap or a floor IV. A...
Which of the following statements is true?
[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 is true? I. Knock-out options start...
Which of the following statements are true:
Which of the following statements are true: I. All investors regardless of their expectations face the same efficient frontier which is always the market portfolio II. Investors will have different efficient frontiers based upon their views of expected risks, returns and correlations III. Investors risk appetite will determine their choice...
If the continuously compounded risk free rate is 4% per year, and the continuous rate of dividend on a broad market index is 1% annually, what is the no-arbitrage 6-month futures price of the index if its spot value is $1000?
If the continuously compounded risk free rate is 4% per year, and the continuous rate of dividend on a broad market index is 1% annually, what is the no-arbitrage 6-month futures price of the index if its spot value is $1000?A . $1015.11B . $1015.00C . $1030.45D . $985.11View AnswerAnswer:...
For a forward contract on a commodity, an increase in carrying costs (all other factors remaining constant) has the effect of:
For a forward contract on a commodity, an increase in carrying costs (all other factors remaining constant) has the effect of:A . increasing the forward priceB . decreasing the forward priceC . increasing the spot priceD . decreasing the spot priceView AnswerAnswer: A Explanation: The forward price for a commodity...
An investor in mortgage backed securities can hedge his/her prepayment risk using which of the following?
An investor in mortgage backed securities can hedge his/her prepayment risk using which of the following? I. Long swaption II. Short cap III. Short callable bonds IV. Long fixed/floating swapA . II and IIIB . I and IIIC . II and IVD . I and IVView AnswerAnswer: B Explanation: Mortgage...
The yield to maturity for a zero coupon bond is equivalent to:
The yield to maturity for a zero coupon bond is equivalent to:A . short rates for the maturity of the bondB . the coupon rate for the bondC . forward rates for the maturity of the bondD . the spot rate from now till t years, where t is the...
The securities market line (SML) based upon the CAPM expresses the relationship between
The securities market line (SML) based upon the CAPM expresses the relationship betweenA . asset beta and expected returnsB . asset standard deviation and expected returnsC . excess returns from the asset and its standard deviationD . market returns and asset returnsView AnswerAnswer: A Explanation: The security market line is...
What is the duration of a 10 year zero coupon bond. Assume the bond is callable (ie, the issuer can buy it back) at face value at any time during its existence.
What is the duration of a 10 year zero coupon bond. Assume the bond is callable (ie, the issuer can buy it back) at face value at any time during its existence.A . 0 yearsB . 5 yearsC . 1 yearD . 10 yearsView AnswerAnswer: D Explanation: The key point...
