If the forward interest rate decreases while neither current short-term nor expected future short-term zero rates change, which of the following theories of the term structure of interest rates must be violated? a) Expectation theory

2. Market segmentation theory
3. Liquidity preference theory
4. Both (b) and (c)
5. None of the above

Which of the following positions will result in a negative profit if the stock price will substantially increase? a) Bull spread

2. Bear spread
3. Butterfly spread
4. Straddle
5. At least two of the above positions

When we find the price of the American option using a multi-step binomial option pricing model, we use the same risk-neutral probability for all sub-trees. We can do so because:

1. We divide the time to maturity into EQUAL time intervals
2. We use the same u and d for all subtrees
3. Risk-free interest rate is the same for any time period
4. Both (a) and (b)
5. Both (a) and (c)
6. Both (b) and (c)
7. All (a), (b), and (c)

Assume there are no transaction costs. If the current price of an asset is above its forward price, then, most probably, a) The asset pays dividends

2. The asset is a consumption asset
3. There are storage costs for the asset
4. Either (a) or (b)
5. Either (a) or (c)
6. Either (b) or (c)
7. None of the above follow are