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

Which of the following will have the effect of increasing the duration of a bond, all else remaining equal:

I. Increase in bond coupon

II. Increase in bond yield

III. Decrease in coupon frequency

IV. Increase in bond maturity

Options :

A : III and IV

B : I and III

C : I and II

D : II, III and IV

Answer: A

Question 3

A fund manager buys a gold futures contract at $1000 per troy ounce, each contract being worth 100 ounces of gold. Initial margin is $5,000 per contract, and the exchange requires a maintenance margin to be maintained at $4,000 per contract. Prices fall the next day to $980. What is the margin call the fund manager faces in respect of daily variation margin ?

Options :

A : $1000

B : $2000

C : $7000

D : $0

Answer: B

Question 4

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 5

The price of an interest rate cap is determined by:I. The period to which the cap relatesII. Volatility of the underlying interest rateIII. The exercise or the strike rateIV. 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

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