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When graphing the efficient frontier, the two axes are:
When graphing the efficient frontier, the two axes are:A . Asset beta and standard deviation of the market portfolioB . Expected return and asset's betaC . Portfolio return and market standard deviationD . Portfolio return and portfolio standard deviationView AnswerAnswer: D Explanation: The efficient frontier is plotted on a graph...
Backwardation can happen in markets where
Backwardation can happen in markets whereA . convenience yield is less than the total interest and carrying costsB . convenience yields are greater than the total interest, storage and other carrying costsC . convenience yields are positiveD . convenience yields are zeroView AnswerAnswer: B Explanation: Convenience yield is the benefit...
Which of the following best describes the efficient frontier?
Which of the following best describes the efficient frontier?A . The efficient frontier identifies portfolios with the lowest return per unit of volatilityB . The efficient frontier identifies portfolios with the highest return per unit of volatilityC . The efficient frontier identifies the market portfolioD . The efficient frontier identifies...
Which of the following does not explain the shape of an yield curve?
Which of the following does not explain the shape of an yield curve?A . Market segmentation theoryB . The expectations hypothesisC . The efficient markets hypothesisD . The liquidity preference theoryView AnswerAnswer: C Explanation: The efficient markets hypothesis states that all known information is captured in the prices of a...
Calculate the fair no-arbitrage spot price of oil if the price of a one year forward is $75, the discrete one year interest rates are 6%, and annual storage costs are $4 per barrel paid at the end of the year.
Calculate the fair no-arbitrage spot price of oil if the price of a one year forward is $75, the discrete one year interest rates are 6%, and annual storage costs are $4 per barrel paid at the end of the year.A . $70.75B . $74.53C . $71D . $66.98View AnswerAnswer:...
What is the value of the swap to the investor two years hence, immediately after the net interest payments are exchanged?
An investor enters into a 4 year interest rate swap with a bank, agreeing to pay a fixed rate of 4% on a notional of $100m in return for receiving LIBOR. What is the value of the swap to the investor two years hence, immediately after the net interest payments...
A bullet bond refers to a bond:
A bullet bond refers to a bond:A . that carries no coupon payments during its lifetimeB . that provides for fixed coupons and repayment of principal at maturityC . that is issued by a sovereignD . that provides for floating rate interest payments during its lifetimeView AnswerAnswer: B Explanation: Choice...
What should the trader do?
A trader comes in to work and finds the following prices in relation to a stock: $100 spot, $10 for a call expiring in one year with a strike price of $100, and $10 for a put with the same expiry and strike. Interest rates are at 5% per year,...
Which of the following statements is not correct with respect to a European call option:
Which of the following statements is not correct with respect to a European call option:A . A increase in the risk-free rate of interest always increases the value of the optionB . An increase in the price of the underlying always increases the value of the optionC . An increase...
The forward price of a physical asset is affected by:
The forward price of a physical asset is affected by:A . the spot price, the risk-free rate, carrying costs, any other cash flows from holding the asset and the volatility of spot pricesB . the spot price, the risk-free rate, carrying costs, any other cash flows from holding the asset...
