Question 1

Which of the following describes the efficient frontier most accurately?

Options :

A :

The efficient frontier identifies portfolios with the lowest level of volatility for the lowest possible returns

B : The efficient frontier identifies portfolios with the highest return for a given level of volatility

C : The efficient frontier identifies portfolios with the highest level of volatility for a given level of returns

D : None of the above

Answer: B

Question 2

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 3

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 4

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 5

Which of the following is not a money market security

Options :

A : Treasury notes

B : Treasury bills

C : Bankers' acceptances

D : Commercial paper

Answer: A

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