Archives: Quiz

Which of the following is true for a long position in an option A. Both gamma and vega are negative B. Gamma is negative and vega is positive C. Gamma is positive and vega is negative D. Both gamma and […]

A company has a $36 million portfolio with a beta of 1.2. The futures price for a contract on an index is 900. Futures contracts on $250 times the index can be traded. What trade is necessary to increase beta […]

Which of the following is NOT true about call and put options: A. An American option can be exercised at any time during its life B. A European option can only be exercised only on the maturity date C. Investors […]

Which of the following is true for u in a Cox-Ross-Rubinstein binomial tree? A. It depends on the interest rate and the volatility B. It depends on the volatility but not the interest rate C. It depends on the interest […]

Which of the following is a use of a currency swap? A. To exchange an investment in one currency for an investment in another currency B. To exchange borrowing in one currency for borrowings in another currency C. To take […]

What is the size of one option contract on the S&P 500? A. 250 times the index B. 100 times the index C. 50 times the index D. 25 times the index The six-month zero rate is 8% per annum […]

In a floor with semiannual reset dates, the floor rate is 3.5% per annum and the notional principal is $1 million. Suppose that the LIBOR rate is 3% per annum for a particular 6-month period. What is the approximate payoff […]

Which of the following describes a cliquet option A. An option to exchange one asset for another B. An instrument when the holder can choose between several alternative options C. An option on an option with predetermined strike prices for […]

As inventories of a commodity decline, which of the following is true? A. The one-year futures price as a percentage of the spot price increases B. The one-year futures price as a percentage of the spot price decreases C. The […]

Which of the following is true? A. The optimal hedge ratio is the slope of the best fit line when the spot price (on the y-axis) is regressed against the futures price (on the x-axis). B. The optimal hedge ratio […]

What is the number of companies underlying the iTraxx index? A. 50 B. 75 C. 100 D. 125 A speculator can choose between buying 100 shares of a stock for $40 per share and buying 1000 European call options on […]

Duration matching immunizes a portfolio against A. Any parallel shift in the yield curve B. All shifts in the yield curve C. Changes in the steepness of the yield curve D. Small parallel shifts in the yield curve How many […]

A one-year forward contract is an agreement where A. One side has the right to buy an asset for a certain price in one year’s time. B. One side has the obligation to buy an asset for a certain price […]

A floating-rate lender wants to use a collar as a hedge. Which of the following is appropriate? A. Buy a cap and sell a floor B. Buy a cap and buy a floor C. Sell a cap and sell a […]

Which of the following best describes the term ‘spot price’ A. The price for immediate delivery B. The price for delivery at a future time C. The price of an asset that has been damaged D. The price of renting […]

An August CDD weather option is offered on the cumulative monthly CDD at an Atlanta weather station. An investor has a long call with a strike price of 375 and a short call with a strike price of 400. The […]

Which of the following is true as time to maturity increases? A. The volatility smile for currency options tends to become more pronounced B. The volatility smile for currency options tends to become less pronounced C. The volatility smile for […]

On a certain day the highest temperature is 77 degrees and the lowest temperature is 61 degrees. What is the day’s HDD? A. 5 B. 12 C. 4 D. 0 A trader uses 3-month Eurodollar futures to lock in a […]

On a certain day the highest temperature is 77 degrees and the lowest temperature is 61 degrees. What is the day’s CDD? A. 5 B. 12 C. 4 D. 0 For what range of losses is the equity tranche of […]

A volatility surface is a table showing the relationship between which of the following A. Implied volatility, time to maturity, and strike price B. Implied volatility, historical volatility, and time to maturity C. Historical volatility, strike price, and time to […]

AIG lost money because A. It bought tranches created from mortgages B. It invested heavily in real estate C. It invested heavily in the stock market D. It insured AAA tranches of ABS CDOs A company due to pay a […]

Which of the following is NOT true? A. Gold and silver are investment assets B. Investment assets are held by significant numbers of investors for investment purposes C. Investment assets are never held for consumption D. The forward price of […]

The term population density refers to the number of organizations that have the same rate of growth in a particular industrial segment. The more an organization pursues vertical integration the larger it becomes, and the bureaucratic costs associated with managing […]

A strategy in which an organization takes over and owns its distributors is known as backward vertical integration. At the felt conflict stage in Pondy’s model, subunits in conflict quickly develop an emotional response toward one another. Answer: TRUE Copyrights […]

Game theory is particularly useful in analyzing situations where a company is competing against a limited number of rivals in its domain and they are highly interdependent. A patent is valid for a period of 75 years from the date […]

A culture based on entrepreneurial norms and values is less likely to encourage innovation than a culture that is conservative and bureaucratic. A collateral organizational structure is an informal organization of managers set up parallel to the formal organizational structure […]

Small-batch technology has a higher level of technical complexity than large-batch technology. The keiretsu system is a form of minority ownership. Answer: TRUE Functional structure provides people with the opportunity to learn from one another and become more specialized and […]

The environment in which an organization operates is a major source of uncertainty. “Excellence” is an example of an instrumental value. Answer: FALSE Fixed socialization tactics allow newcomers to learn on the job, as members of a team. Answer: FALSE […]

Trademarks give their owner the sole legal right to use certain names or symbols and control the use to which they are put. Isomorphism is normative when organizations intentionally imitate and copy one another to increase their legitimacy. Answer: FALSE […]

Environmental complexity is a function of the strength, number, and interconnectedness of the specific and general forces that an organization has to manage. Cooptation is a strategy used for managing competitive resource interdependencies. Answer: FALSE Organizations are very status conscious […]

In a multidivisional structure, each division is independent and self-contained. An organization can reduce environmental uncertainty by entering into global markets. Answer: FALSE The embryonic stage comes after the growth stage in a product life cycle. Answer: FALSE According to […]

When subordinates tasks are complex and dissimilar, a manager’s span of control needs to be wide. A network structure increases the cost of production. Answer: FALSE As the number of levels in its managerial hierarchy increases, it becomes difficult for […]

Tasks associated with a role are clearly defined in a mechanistic structure. The forces that constitute the specific environment shape the general environment and affect the ability of all organizations in a particular environment to obtain resources. Answer: FALSE According […]

Jane works for a manufacturing plant that has been under pressure to reduce pollution. Jane increased her knowledge of environmental laws in order to help the company follow waste disposal laws. Which of the following political tactics is being used […]

The Aston Studies concluded that ________ in determining an organization’s choice of structure. A) external environment of the organization is more important than organizational size B) organizational size is more important than technology C) organizational culture is more important than […]

Which of the following terms refers to the pattern of decisions and actions that managers take to use core competences to achieve a competitive advantage and outperform competitors? A) product formation chain B) PERT chart C) strategy D) value engineering […]

Which of the following factors is most likely to cause organizational inertia? A) risk aversion B) decentralized decision-making C) employee empowerment D) flat hierarchy of authority Which of the following terms refers to the goals that explain why the organization […]

Cognitive dissonance is the state of discomfort or anxiety that a person feels when there is an inconsistency between his or her beliefs and actions. In an organization, managers have the strongest property rights. Answer: FALSE The workforce and managers […]

Which of the following statements is most likely to be true regarding the growth stage of a product life cycle? A) The growth stage of a product life cycle comes after the maturity stage. B) During the growth stage, demand […]

Which of the following tools is most likely to help managers develop a structured process for evaluating different new product development proposals and deciding which to support? A) Pareto chart B) stage-gate development funnel C) critical path method D) fishbone […]

Which of the following statements is definitely true regarding environmental dynamism? A) As a company decreases the number of suppliers, its environmental dynamism increases. B) A company can reduce its environmental dynamism by selecting a decentralized organizational structure. C) When […]

Which of the following functions is most likely to be true regarding a product champion? A) A product champion is always appointed by the top-management team in an organization. B) A product champion takes ownership of the project. C) A […]

Which of the following technologies simplifies the process of developing prototypes? A) CAD B) CAMM C) JIT inventory systems D) CIM Which of the following statements is true regarding nonprogrammed decision-making? A) Nonprogrammed decision-making is performed with the help of […]

Rites of enhancement ________. A) allow an organization to change its norms and values B) motivate organizational members to be committed to the company’s norms and values C) build common bonds between organizational members D) encourage members to learn and […]

A manager obtains an assignment that brings him into contact with many managers and many functions so that he can obtain information that can be used to make him and his function nonsubstitutable. Which of the following political tactics is […]

According to Charles Perrow, which of the following dimensions underlie the difference between routine and nonroutine or complex tasks? A) task variability and task interdependence B) task variability and task analyzability C) task analyzability and technical complexity D) task interdependence […]

Which of the following statements is true regarding a product team structure? A) Use of product team structure increases the product development time. B) In a product team structure divisions are organized according to the requirements of the different locations […]

Which of the following is a disadvantage of a multidivisional structure? A) A multidivisional structure decreases division of labor which ultimately decreases organizational effectiveness. B) It becomes difficult for corporate headquarters to identify the divisions in which an investment of […]

An ethical dilemma is the quandary people experience when they must decide whether or not they should act in a way that benefits someone else, even if it harms others and isn’t in their own interest. The first stage of […]

Role ambiguity occurs when two or more people have different views of what another person should do and, as a result, make conflicting demands on the person. A multidivisional structure is characterized by a corporate headquarters staff which is composed […]