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An investor starts with ¬1 million and converts it to £694,500, which is then invested
for one year. In a year the investor has £736,170, which she then converts back to euros
at an exchange rate of 0.68 pounds per euro. The annual euro rate of return earned was
_____.
A.7.55 percent
B.6.00 percent
C.7.45 percent
D.8.13 percent
E.8.26 percent
Selling stocks short is very risky.
a.True
b.False
A nine-year maturity AAA-rated corporate bond has a 6 percent coupon rate. The
bond's promised yield is currently 5.75 percent and the bond sells for its FPV. The bond
pays interest semiannually and has an annual duration of 7.1023 years.
a. What is the bond's convexity?
b. If promised yields decrease to 5.45 percent, what is the bond's predicted new price,
including convexity?
c. Based on your result in b, would you prefer to have a bond with more or less
convexity? Explain.
An agreement between two parties to exchange a series of specified periodic cash flows
in the future based on some underlying instrument or price is a(n)
A.forward agreement.
B.futures contract.
C.interest rate collar.
D.option contract.
E.swap contract.
The study of personal finance involves how people _____ their financial resources.
a.spend
b.save
c.invest
d.all of these.
A 180-day $3 million CD has a 4.25 percent annual rate quote. If you buy the CD, how
much will you collect in 180 days?
$3 million [1 + (0.0425 180/360)]
A.$3,047,439
B.$3,045.678
C.$3,062,877
D.$3,063,750
E.$3,127,500
If an N year security recovered the same percentage of its cost in PV terms each year,
the duration would be
A.N.
B.0.
C.sum of the years/N.
D.N!/N2.
E.none of the options.
