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A bond has a face value of $1,000 and five years to maturity. This bond has a coupon rate of 13% and is selling in the market today for $902. Coupon...

1.    A bond has a face value of $1,000 and five years to maturity. This bond has a coupon rate of 13% and is selling in the market today for $902. Coupon payments are made annually on this bond. What is the yield-to-maturity (YTM) for this bond?


A)  13.25%

B)  12.75%

C)  16.00%

D)  11.45%  



2.    If the hedge ratio is 0.96, the portfolio value is $10 million, the current price of a futures contract is $100,000, then the number of contracts needed to hedge is


A)  0.0096

B)  0.96

C)  96

D)  9,600



3.    An investor choosing to hedge in the futures market


A)  Gives up the opportunity for gains

B)  Reduces the opportunity for losses

C)  Both (A) and (B)

D)  Neither (A) nor (B)



4.    A portfolio manager with $100 million in Treasury securities can reduce interest-rate risk by


A)  Selling financial futures

B)  Going long on financial futures

C)  Buying financial futures

D)  Doing nothing



5.    The main reason why futures contracts are marked-to-market every trading day is because


A)  It makes the accounting procedure simpler

B)  It allows each party to recognize gains or losses

C)  It reduces the chance of loss for the exchange

D)  It is required by law




6.    If a bank has sold a futures contract that perfectly hedges its portfolio of Treasury securities, and interest rates fall, then


A)  The bank suffers a loss

B)  The bank has a gain

C)  The bank income is unchanged

D)  None of the above


Top Answer

1 - C 2 - C 3... View the full answer

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