A decrease in which of the following would increase the price of a call option on a common stock, ceteris paribus? I. Stock price II. Stock price volatility III. Time to expiration IV. Exercise price

Select one:

a.

I, III, and IV only

b.

IV only

c.

I, II, and IV only

d.

II only

e.

II and IV only

T-Row Bank has assets of $150 million, liabilities of $135 million, and equity of $15 million. The duration the assets is two years and the duration of the liabilities is ten years. Row Banks has a ______ adjusted duration gap. A _____ position in T-bond futures should be used to hedge the interest rate risk.

Select one:

a.

positive; short

b.

negative; long

c.

negative; short

d.

positive; long