Eartheral Mandental Prolilormial

Only available on StudyMode
  • Download(s) : 132
  • Published : September 14, 2012
Open Document
Text Preview
Question 1

Before expiration, the time value of an in the money call option is always Answer
equal to zero.
positive.
negative.
equal to the stock price minus the exercise price.
None of these is correct.
1 points
Question 2

The intrinsic value of an out-of-the-money put option is equal to Answer
the stock price minus the exercise price.
the put premium.
zero.
the exercise price minus the stock price.
None of these is correct.
1 points
Question 3

Use the Black-Scholes Option Pricing Model for the following problem. Given: SO= $70; X = $70; T = 70 days; r = 0.06 annually (0.0001648 daily); σ = 0.020506 (daily). No dividends will be paid before option expires. The value of the call option is _______. Answer

$10.16
$5.16
$0.00
$2.16
None of these is correct
1 points
Question 4

Ceteris paribus, the price and yield on a bond are
Answer
positively related.
negatively related.
sometimes positively and sometimes negatively related.
not related.
indefinitely related.
1 points
Question 5

If a 6% coupon bond is trading for $950.00, it has a current yield of ____________ percent. Answer
6.5
6.3
6.1
6.0
6.6
1 points
Question 6

SIVs raise funds by ______ and then use the proceeds to ______. Answer
issuing short-term commercial paper; retire other forms of their debt
issuing short-term commercial paper; buy other forms of debt such as mortgages
issuing long-term bonds; retire other forms of their debt
issuing long-term bonds; buy other forms of debt such as mortgages
issuing short-term commercial paper; retire other forms of their debt and issuing long-term bonds; buy other forms of debt such as mortgages 1 points Question 7

Treasury STRIPS are
Answer
securities issued by the Treasury with very long maturities.
extremely risky securities.
created by selling each coupon or principal payment from a whole Treasury bond as a separate cash flow.
created by pooling mortgage payments made to the Treasury.
created both by selling each coupon or principal payment from a whole Treasury bond as a separate cash flow and by pooling mortgage payments made to the Treasury 1 points
Question 8

If the value of a Treasury bond was higher than the value of the sum of its parts (STRIPPED cash flows) you could Answer
profit by buying the stripped cash flows and reconstituting the bond.
not profit by buying the stripped cash flows and reconstituting the bond.
profit by buying the bond and creating STRIPS.
not profit by buying the stripped cash flows and reconstituting the bond but profit by buying the bond and creating STRIPS
None of these is correct.
1 points
Question 9

Which of the following two bonds is more price sensitive to changes in interest rates? 1) A par value bond, D, with a 2-year-to-maturity and a 8% coupon rate. 2) A zero-coupon bond, E, with a 2-year-to-maturity and a 8% yield-to-maturity. Answer

Bond D because of the higher yield to maturity.
Bond E because of the longer duration.
Bond D because of the longer time to maturity.
Both have the same sensitivity because both have the same yield to maturity.
None of these is correct.
1 points
Question 10

A rate anticipation swap is an exchange of bonds undertaken to Answer
shift portfolio duration in response to an anticipated change in interest rates.
shift between corporate and government bonds when the yield spread is out of line with historical values.
profit from apparent mispricing between two bonds.
change the credit risk of the portfolio.
increase return by shifting into higher yield bonds.
1 points
Question 11

Holding other factors constant, the interest-rate risk of a coupon bond is lower when the bond's: Answer
term-to-maturity is lower.
coupon rate is higher.
yield to maturity is higher.
term-to-maturity is lower and coupon rate is...
tracking img