35 QUESTION 4 If the risk-free rate is 6.5 percent compounded annually, what is the continuously compounded risk-free rate equal to? 1/1n1.065 6.10% In 1.065 6.24% 21.065 - 1 QUESTIONS 31 Under European put-call parity, the present value of the strike price is equivalent to the present value of a U.S. Treasury bill with a face value equal to the strike price. True False QUESTION 6 31 One of the drawbacks of Value-at-Risk models is that it promotes backtesting. That it it assumes historical patterns are likely to occur again. True False QUESTION 7 Which one of the followings is not an argument put forward by supporters of derivatives? It provides risk management It improves the standardization of commodity market It helps integration of global capital markets and efficient allocation of funds it curbs speculation and gambling incentives it reduces transaction costs QUESTIONS Which one of the following grants its owner the right to buy or to sell an asset at a fixed price at any time during a stated period? American option Forward contract Futures contract European option