Question 6

1. Swaps create value if

   A. relative prices differ across markets.

   B. there are barriers to entry in some markets.

   C. information is costly.

   D.All of the options.

   E. None of the options.

   Enter A,B,C,D or E in blank

1 points

Question 7

1. An increase in interest rates

   A. increases the market value of the FI's financial assets and liabilities.

   B. decreases the market value of the FI's financial assets and liabilities.

   C. decreases the book value of the FI's financial assets and liabilities.

   D. increases the book value of the FI's financial assets and liabilities.

   E. has no impact on the market value of the FI's financial assets and liabilities.

   Enter A,B,C,D or E in blank

1 points

Question 8

1. Marginal default probability refers to the

   A. probability that a borrower will default over a specified multi-year period.

   B. marginal increase in the default probability due to a change in credit premium.

   C. historic default rate experience of a bond or loan.

   D. expected maximum change in the loan rate due to a change in the credit premium.

   E.probability that a borrower will default in any given year.

   Enter A,B,C,D or E in blank

1 points

Question 9

1. 18. The duration of a 5-year zero-coupon bond is A. smaller than 5. B. larger than 5. C. equal to 5. D. equal to that of a 5-year 10% coupon bond. E. None of these is correct.

   Enter A,B,C,D or E in blank

1 points

Question 10

1. Suppose that you purchased a call option on the S&P 100 index. The option has an exercise price of 700 and the index is now at 760. What will happen when you exercise the option? A. You will have to pay $6,000. B. You will receive $6,000. C. You will receive $700. D. You will receive $760. E. You will have to pay $7,000.

   Enter A,B,C,D or E in blank