Question 1

If interest rates and spot prices stay the same, an increase in the value of a call option will be accompanied by:

Options :

A : a decrease in the value of the corresponding put option

B : an indeterminate change in the value of the corresponding put option

C : an increase in the value of the corresponding put option

D : no impact in the value of the corresponding put option

Answer: C

Question 2

Callable corporate bonds:

Options :

A : generally yield less than non-callable bonds due to the call feature

B : need to be priced lower than non-callable bonds to make them attractive to investors

C : are more convex than their non-callable counterparts

D : are generally called when their prices have fallen below the issuance price

Answer: B

Question 3

By market convention, which of the following currencies are not quoted in terms of 'direct quotes' versus the USD?

Options :

A : EUR

B : EUR

C : KWD

Answer: A

Question 4

The price of an interest rate cap is determined by:

I. The period to which the cap relates

II. Volatility of the underlying interest rate

III. The exercise or the strike rate

IV. The risk free rate

Options :

A :

I, II, III and IV

B : I, II and III

C : II, III and IV

D : I, II and IV

Answer: B

Question 5

Identify the underlying asset in a treasury note futures contract?

Options :

A : Any long term US Treasury bond with a maturity of more than 10 years and not callable within 10 years

B : Any long term US Treasury note with a maturity between 6.5 years and 10 years from the date of delivery

C : Any long term US Treasury bond with a maturity of more than 15 years and not callable within 15 years

D : Any of the above, with the price adjusted with the coupon and maturity date of the bond delivered

Answer: B

Free 8013 Mock Exam – Practice Online Confidently