Question 1

Which of the following is a primary characteristic that differentiates asset-backed commercial paper (ABCP) from standard ABS?

Options :

A : ABCP has a maturity of less than one year, whereas standard ABS has longer maturities.

B : ABCP offers higher yields due to its longer maturity compared to standard ABS.

C : ABCP is typically backed by fixed-rate assets, while standard ABS is backed by variable-rate assets.

D : ABCP is secured by long-term investments, unlike standard ABS which is secured by short-term investments.

Answer: A

Question 2

Michael holds preferred shares of a company that comprises only a small portion of the total market value of preferred shares in Canada. What risk is Michael exposed to due to this market characteristic?

Options :

A : Extension risk.

B : Credit risk.

C : Liquidity risk.

D : Interest rate risk.

Answer: C

Question 3

Which of the following statements best describes the main advantage of investing in listed private equity companies over traditional private equity firms?

Options :

A : Listed private equity companies offer higher returns with lower risk due to public market regulation.

B : Listed private equity companies have greater access to inside information compared to traditional firms.

C : Listed private equity companies provide better liquidity and access to capital compared to traditional private equity firms.

D : Listed private equity companies are less regulated compared to traditional private equity firms.

Answer: C

Question 4

Sophia believes that the spread between a corporate bond and a government bond will increase in the short term due to expected economic volatility. What is the most appropriate strategy if Sophia is currently in a yield spread arbitrage position?

Options :

A : Increase her short position in the corporate bond and cover her long position.

B : Maintain current positions as the spread is expected to widen.

C : Increase her long position in the corporate bond and short the government bond.

D : Reduce both long and short positions to minimize risk.

Answer: A

Question 5

Alex, a 55-year-old investor, currently holds a portfolio of $200,000, allocated as follows: 50% equities, 30% fixed income, and 20% cash. Over the past year, the equity component has appreciated by 15%, the fixed income by 5%, and the cash balance has remained unchanged. Given these changes, what is Alex’s new allocation percentage in equities?

Options :

A : 50.00%.

B : 52.75%.

C : 55.25%.

D : 54.00%.

Answer: B

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