FTX4056S - Test 1 _Aug 2019_.docx - FTX4056S APPLIED INVESTMENTS CLASS TEST 1 TIME 90 MINUTES 21 AUGUST 2019 MARKS 75 PLEASE READ THE FOLLOWING

FTX4056S - Test 1 _Aug 2019_.docx - FTX4056S APPLIED...

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FTX4056S APPLIED INVESTMENTS CLASS TEST 1 TIME: 90 MINUTES 21 AUGUST 2019 MARKS: 75 PLEASE READ THE FOLLOWING INSTRUCTIONS CAREFULLY: 1. PLEASE DO NOT TURN THIS PAGE OVER UNTIL INSTRUCTED TO DO SO . 2. Ensure that your name and student number appear on ALL answer booklets. Complete this before the test commences. 4. You may not write anything unless you have been instructed to do so before the start of the test or once you have been instructed to stop writing. 5. You must remain seated until every paper has been collected . 6. The invigilators will answer no questions relating to the paper during the test. 7. No queries will be answered during the test. Clearly state any assumptions made in answering each question. 8. There is no negative marking for the MCQ. 9. It is the student’s responsibility to ensure that the handwriting presented is clear and readable. Failure to do so may result in the penalising of marks. 10. Round off your answers to 3 decimal places. 11. Start Section C on a new page. This test paper consists of 6 pages including the cover page and a formula sheet. 1
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Section A: Multiple Choice (8 questions : 24 marks) 1)When performing a delta-neutral hedge on a portfolio: a.We must short 6500 units of the underlying if the net delta of theportfolio is 6500.b.We must long 3300 units of the underlying if the net delta of theportfolio is 3300.c.We should also hedge the gamma to avoid frequent rebalancing of thedelta-neutral hedge.d.Both b. and c. are correct.e.Both a. and c. are correct.
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