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1. An interest rate ____ is a combination of a cap and a floor a. Swap b. FRA c. LIBOR d. Collar e. None of

1. An interest rate ____ is a combination of a cap and a floor

a.

Swap

b.

FRA

c.

LIBOR

d.

Collar

e.

None of the above

2. Which of the following statements is true?

a.

If Duration > Investment Horizon, the investor faces Net Reinvestment Risk.

b.

If Duration < Investment Horizon, the investor faces Net Price Risk.

c.

If Duration = Investment Horizon, the investor is immunized.

d.

All of the above statements are true.

e.

None of the above statements are true.

True or False

3.The pure expectations hypothesis suggests futures prices serve as unbiased forecasts of future spot prices.

4.According to the cost of carry model the futures price is the present value of the spot price discounted at the risk free rate.

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