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What kind of a risk attitude does a utility function with downward sloping curvature indicate?A . risk mitigationB . risk averseC . risk seekingD . risk neutralView AnswerAnswer: B Explanation: A utility function is graphed with utility on the y-axis and the variable driving utility (generally wealth) along the x-axis....

Which of the following expressions represents the Treynor ratio, where is the expected return, is the standard deviation of returns, rm is the return of the market portfolio and rf is the risk free rate: A) B) C) D) A . Option AB . Option BC . Option CD ....

An equity portfolio manager desires to be 'market neutral'. His portfolio is valued at $10m and has a beta of 0.7 to the broad market index. The index is currently at 1000 and an index contract multiplier is specified as 250. What should he do to make the beta of...

Which of the following statements are true: I. Protective puts are a form of insurance against a fall in prices II. The maximum loss for an investor holding a protective put is equal to the decline in the value of the underlying III. The premium paid on the put options...

Credit risk in the case of a CDO (Collateralized Debt Obligation) is borne by:A . The sponsoring institutionB . InvestorsC . The reference entityD . The Special Purpose Vehicle (SPV)View AnswerAnswer: B Explanation: Investors in CDOs bear credit risk. The SPV is merely a conduit that owns the underlying assets...

Which of the following expressions represents Jensen's alpha, where is the expected return, is the standard deviation of returns, rm is the return of the market portfolio and rf is the risk free rate:A . https://www.riskprep.com/images/stories/questions/102.12.b.png B) https://www.riskprep.com/images/stories/questions/102.12.d.png C) https://www.riskprep.com/images/stories/questions/102.12.c.png D) https://www.riskprep.com/images/stories/questions/102.12.a.pngB . Option AC . Option BD . Option...

[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 is not an approach to attempt to...

[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 describes a 'quanto' instrument:A . options on...

Which of the following statements are true: I. A deep in-the-money call option has a value very close to that of a forward contract with a forward price equal to the exercise price II. If the volatility of a stock goes down to zero, the value of a call option...

How are foreign exchange futures quoted against the US dollar?A . Futures forex prices are always quoted as the number of units of the foreign currency that one US dollar can buyB . It depends upon the currency - futures forex prices follow the same convention as for spot pricesC...