Question 1

The two components of risk in a commodities futures portfolio are:

Options :

A : Changes in the convenience yield and storage costs

B : Changes in spot prices and carrying costs, also called commodity lease rates

C : Changes in interest rates and spot prices

D : The risk from change in basis and interest rates

Answer: B

Question 2

What is the price of a treasury bill with $100 face maturing in 90 days and yielding 5%?

Options :

A : $95.24

B : $95.00

C : $98.78

D : $101.23

Answer: C

Question 3

A bank sells an interest rate swap to its client, with the client agreeing to pay the bank a fixed 4% and receive 3 month LIBOR + 100 basis points, payments due every quarter. After quarter 1, the 3 month LIBOR is 2% pa. Which of the following payments will happen in respect of this swap, assuming the contract notional is $100m, and the rate convention is 30/360.

Options :

A : Bank pays customer $1,000,000 and customer pays the bank $750,000

B : Bank pays customer $250,000

C : Customer pays bank $250,000

D : Bank pays customer $1,000,000

Answer: C

Question 4

What is the standard deviation (in dollars) of a portfolio worth $10,000, of which $4,000 is invested in Stock A, with an expected return of 10% and standard deviation of 20%; and the rest in Stock B, with an expected return of 12% and a standard deviation of 25%. The correlation between the two stocks is 0.6.

Options :

A : $2,081

B : $1,201

C : $1,204

D : $4,330,000

Answer: A

Question 5

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