INVESTMENTS FIN403 SEU Questions Investments FIN403

PINK ASSIGNMET 3 FIN403 2024 1/ The duration of a bond is determined by a combination of the maturity date and value, and : A. The pattern of coupon payments B. The call premium C. Put premium D. None of the above 2/ Duration is affected primarily by : A. The maturity of the bond B. The market rate of interest C. The coupon rate D. All of the above 3/ For all bonds of equal risk, the bond that had the greatest duration and therefore the greatest price sensitivity is: A. Treasury bonds B. Zero-coupon bonds C. Corporate bonds. D. Long-term government bonds 4/ The leverage strategy of buying call options is based on the idea that : A. A small change in the price of the underlying common stock can cause a large change in the price of the option. B. Leverage reduces the risk of loss on the option contract. C. Leverage reduces the risk of loss on the portfolio. PINK D. None of the above 5/ A stock is selling for $45.75 with a call option available at a $40 strike that has a premium of $7.50. What percentage of the common stock price does the speculative premium represent? 16.39% 14.375% 12.57% 3.83% speculative premium / common stock price 1.74/45.75 = 0.383 OR 3.83% 6/ The financial futures market has evolved over recent time because of : A. Volatility and risk in the foreign exchange markets B. Volatility of interest rates. C. Appeal to speculators due to low margin requirements. D. All of the above 7/ The difference between speculators and hedgers is that speculators are _______ while hedgers are ______ . A. Risk-takers; risk averters B. Individual investors; financial managers. C. Short term; long-term D. None of the above 8/ A banker who is paying a fixed 6 percent rate on CDs for the next two years and is afraid interest rates may go down on new loans, may hedge this exposure with interest rate swaps by : PINK A. Swapping a fixed rate for a variable rate B. Swapping a variable rate for a fixed rate. C. Swapping short-term exposure for long-term exposure. D. Swapping long-term exposure for short-term exposure. 9/ An investor may be asked to put up more margin if : A. The price of the commodity goes up in a long position. B. The price of the commodity goes down in a short position. C. The price of the commodity goes up in a short position. D. If the contract has less than one week to run. 10/ The currency futures market is different than the other types of futures markets because: A. The contracts are standardized. B. The currency futures market provides a strong secondary market. C. The currency market has communication networks throughout the world, whereas, the other ones do not. D. A and B 11/ What are the three main categories of financial futures? How does the currency futures market differ from the foreign exchange market? 12/ What is meant by the exercise or strike price on an option? Explain how options can be used to protect a short position.