A fixed-income portfolio manager sets a minimum acceptable rate of return on the bond
portfolio at 5% per year over the next 4 years. The portfolio is currently worth $10
million. One year later interest rates are at 6%. What is the portfolio value trigger point
at this time that would require the manager to immunize the portfolio?
A. $12,155,063
B. $10,205,625
C. $9,627,948
D. $10,500,000
Bonds with coupon rates that fall when the general level of interest rates rise are called
_____________.
A. asset-backed bonds
B. convertible bonds
C. inverse floaters
D. index bonds
A call option has an exercise price of $35 and a stock price of $36.50. If the call option
is trading at $2.25, what is the time value embedded in the option?
A. $0
B. $.75
C. $1.50
D. $2.25
The purchase of a futures contract gives the buyer _________.
A. the right to buy an item at a specified price
B. the right to sell an item at a specified price
C. the obligation to buy an item at a specified price
D. the obligation to sell an item at a specified price
The bulk of most initial public offerings (IPOs) of equity securities goes to
___________.
A. institutional investors
B. individual investors
C. the firm’s current shareholders
D. day traders
You believe that the spread between the September T-bond contract and the June T-bond
futures contract is too large and will soon correct. This market exhibits positive cost of
carry for all contracts. To take advantage of this, you should ______________.
A. buy the September contract and sell the June contract
B. sell the September contract and buy the June contract
C. sell the September contract and sell the June contract
D. buy the September contract and buy the June contract
All exchange rates are expressed as units of foreign currency that can be purchased with
one U.S. dollar. Answer the following about decomposing the manager’s performance.
What is the difference in return of the manager’s portfolio due to currency selection?
A. -5%
B. -3%
C. 2%
D. 1%
When a stock price breaks through the moving average from below, this is considered
to be ______.
A. the starting point for a new moving average
B. a bearish signal
C. a bullish signal
D. none of these options