PLEASE ANSWER ALL QUESTIONS AND SHOW WORK!

1. Under Basel III, the combination of Core Tier 1 capital and the capital conservation buffer raises the Core Tier 1 capital ratio to

		7%
		7.5%
		4.5%
		6%
		None of the above

2. Which of the following correctly describes "Stressed VaR" in Basel 2.5?

It is used as the only risk metric to calculate total capital charge for credit risk

It is used as an additional risk metric FOR CALCUALTING total capital charge for market risk

It replaces the old VaR, which was based on the historical simulation method. The old VaR was used for market risk capital.

Unlike the old VaR, Stressed VaR is based on a 10-day time horizon but 90% confidence level.

3. If an investor successfully uses a technical trading strategy to always make abnormal profits, what level of the efficient markets hypothesis would appear to have been violated?

Weak form

Semi strong form

strong form

No violation

4. You purchased 1,000 shares of a stock at $20 per share. Your margin is 80%. Later, the stock goes up in value by 20%. What is your current equity position in the stock?

$20,000

$16,000

$24,000

None of the above

5. Which of the following responses to abnormal price movements is consistent with the "underreaction hypothesis"?

		Extreme one-day movements in stock prices will be followed by significant movements in the opposite direction
		Extreme one-day movements in stock prices will be followed by significant movements in the same direction
		Extreme one-day movements in stock prices will not be followed by significant movements in stock prices
		None of the above