1. An investor with a long futures position to buy one hundred ounces of gold for $1553 in September 2015 decides to reverse this position in June 2015 when the stop price is $1533 and the September futures price is $1543, they will:

a. Make a loss of $1000

b. Make a profit of $1000

c. Make a loss of $2000

d. Make a profit of $2000

2. If a firm makes a 1 for 5 rights issue when its shares are trading for $9.90 that will allow investors to purchase new shares for $8.00, by how much should the share price fall when they trade ex-rights if there are no other influences on the share price?

a. 32c

2. 38c

3. $1.58

4. $1.90

3. The price effect and the reinvestment effect are both sources of:

a. default risk

b. term structure

c. interest rate risk

d. default risk structure

4. Relative to the maturity of a bond, the duration is:

a. longer when interest rates exceed the coupon rate

b. longer when interest rates are less than the coupon rate

c. shorter when the bond does not pay coupon interest

d. shorter when the bond does pay coupon interest

5. If a short futures position is held by a hedger, a corresponding long futures position must be held by:

a. a speculator

b. a hedger

c. an arbitrageur

d. any of the above

6. Floating rate notes have a duration that:

a. is infinite

b. is equal to one plus the yield divided by the yield

c. is at least equal to the time between coupon payments

d. is at most equal to the time between coupon payments

7. If a 90-day bank bill ($1000 face value) was purchased for $985.56 on the date of issue and sold 30 days later for $991.14, what was the holding period return?

a. 5.44% p.a.

b. 5.66% p.a.

c. 5.94% p.a.

d. 6.89% p.a.

8. An over-the-counter forward contract:

a. Is marked-to-market daily

b. Will be closed-out by the clearing house if a margin call is ignored

c. Is not subject to daily settlement

d. Rarely involves physical delivery