Question 1

A currency with a lower interest rate will trade:

Options :

A : at a forward discount

B : at a forward premium

C : at the same prices for forwards as for the spots

D : cannot be determined solely on the basis of interest rates

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 is not a money market security

Options :

A : Treasury notes

B : Treasury bills

C : Bankers' acceptances

D : Commercial paper

Answer: A

Question 4

A US treasury bill with 90 days to maturity and a face value of $100 is priced at $98. What is the annual bondequivalent yield on this treasury bill?

Options :

A : 8.16%

B : 8.11%

C : 8.28%

D : 8.00%

Answer: C

Question 5

Identify the underlying asset in a treasury note futures contract?

Options :

A : Any long term US Treasury bond with a maturity of more than 10 years and not callable within 10 years

B :

Any long term US Treasury note with a maturity between 6.5 years and 10 years from the date of delivery

C : Any long term US Treasury bond with a maturity of more than 15 years and not callable within 15 years

D : Any of the above, with the price adjusted with the coupon and maturity date of the bond delivered

Answer: B

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