1. Consider a 25-year zero coupon bond. Its yield to maturity, expressed as a semi-annual APR, is 7%. What is the modified duration of this bond:

	A.	3.57
	B.	25.00
	C.	24.15
	D.	23.36
	E.	25.91

2. The manager of a $400 million portfolio of US stocks would like to use a futures position to change their portfolio's beta from its current 0.50 to a target 1.0. The stock index futures contract price is 4,000 with a multiplier of 15. Determine the appropriate futures position.

	A.	Buy 625 contracts
	B.	Sell 6,667 contracts
	C.	Buy 6,667 contracts
	D.	Sell 625 contracts
	E.	Buy 50,000 contracts
	F.	Sell 50,000 contracts
	G.	Buy 3,333 contracts
	H.	Sell 3,333 contracts

3. Which one of the following will not result in a greater forward contract price for an investment asset, holding all else constant?

	a.	An increase in the spot market price of the underlying asset.
	b.	A decrease in the dividend rate.
	c.	An increase in the time-to-final settlement (T) when the cost of carry is positive.
	d.	A lower financing rate.

4. A straight bond has a modified duration of 7, value of 102, and yield-to-maturity is 4%. The bond pays coupons semi-annually and its yield-to-maturity is quoted as a semi-annual APR. If interest rates increase by 25 basis points, compute the modified duration-based estimate of the new price of the bond.

	A.	109.140
	B.	94.860
	C.	98.430
	D.	103.785
	E.	100.215

5. A futures trader goes long 10 contracts when the futures price is $25 per unit and the spot price is $25.25 per unit. Each contract controls 1,000 units, requires an initial margin of $5,000 (per contract), and has a maintenance margin of $3,500. After one day, the futures price decreases to $24.75 and the spot price is $24.75. What is the balance of the margin account?

	a.	2,500.00
	b.	47,500.00
	c.	4,750.00
	d.	5,250.00
	e.	52,500.00