The two components of risk in a commodities futures portfolio are:A . Changes in the convenience yield and storage costsB . Changes in spot prices and carrying costs, also called commodity lease ratesC . Changes in interest rates and spot pricesD . The risk from change in basis and interest rates View Answer Answer:...

## 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 . $94.73 View Answer Answer: B Explanation: The coupon payments can be considered an annuity which can...

## Which of the following correctly describes a "reverse repo"?

Which of the following correctly describes a "reverse repo"?A . An asset swap that is offset by an identical but opposite swapB . Lending cash with securities as a collateralC . Borrowing cash while posting securities as a collateralD . A repo with an undefined maturity period View Answer Answer: B Explanation: A repo,...

## Which of the following statements is INCORRECT according to CAPM:

Which of the following statements is INCORRECT according to CAPM:A . expected returns on an asset will equal the risk free rate plus a compensation for the additional risk measured by the beta of the assetB . the return expected by investors for holding the risky asset is a function of the covariance of...

## What is the standard deviation (in dollars) of a portfolio worth $10,000, of which $4,000 is invested in Stock A, with an expected return of 10% and standard deviation of 20%; and the rest in Stock B, with an expected return of 12% and a standard deviation of 25%. The correlation between the two stocks is 0.6.

What is the standard deviation (in dollars) of a portfolio worth $10,000, of which $4,000 is invested in Stock A, with an expected return of 10% and standard deviation of 20%; and the rest in Stock B, with an expected return of 12% and a standard deviation of 25%. The correlation between the two...

## 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 . $94.73 View Answer Answer: B Explanation: The coupon payments can be considered an annuity which can...

## Which of the following terms best describes this arrangement?

A bank holding a basket of credit sensitive securities transfers these to a special purpose vehicle (SPV), which sells notes based on these securities to third party investors. Which of the following terms best describes this arrangement?A . n-th to default swapB . A credit default swap purchaseC . A synthetic CDO creationD ....

## What should the trader do?

A trader finds that a stock index is trading at 1000, and a six month futures contract on the same index is available at 1020. The risk free rate is 2% per annum, and the dividend rate is 1% per annum. What should the trader do?A . Buy the index spot and sell the...

## If the 3 month interest rate is 5%, and the 6 month interest rate is 6%, what would be the contract rate applicable to a 3 x 6 FRA?

If the 3 month interest rate is 5%, and the 6 month interest rate is 6%, what would be the contract rate applicable to a 3 x 6 FRA?A . 6%B . 6.9%C . 5.5%D . 5% View Answer Answer: B Explanation: The correct answer is Choice ‘b’, as this question is merely asking...

## Determine the enterprise value of a firm whose expected operating free cash flows are $100 each year and are growing with GDP at 2.5%. Assume its weighted average cost of capital is 7.5% annually.

Determine the enterprise value of a firm whose expected operating free cash flows are $100 each year and are growing with GDP at 2.5%. Assume its weighted average cost of capital is 7.5% annually.A . $4,000B . $1,000C . $1,333D . $2,000 View Answer Answer: D Explanation: The operating free cash flows can be...