Question
1. Assume Prime Ltd is a company that invests in various office property markets in Asia. To fund these property acquisitions, Prime Ltd uses, fixed
1. Assume Prime Ltd is a company that invests in various office property markets in Asia. To fund these property acquisitions, Prime Ltd uses, fixed rate mortgage loans in the currency of the country in which the property was acquired. How can Prime Ltd. use swaps to hedge the risk(s)?
Group of answer choices
Exchange fixed for floating interest rates and local to foreign currency in a cross-currency swap
Exchange fixed for floating interest rates in an interest rate swap
Exchange fixed for floating interest rates in a cross-currency swap
Exchange fixed for floating interest rates and local to foreign currency in an interest rate swap
2. The advantage of a cap and collar arrangement compared to an interest rate swap to hedge interest rate risk is:
Group of answer choices
It allows to take advantage of favourable price movements to a certain limit
It locks in an interest rate
It does not involve a dealer
All of the above
3. With respect to a call butterfly spread option strategy which of the following statements is most correct?
Group of answer choices
the buyer of a call butterfly spread anticipates that the underlying asset price will move significantly in either direction
the writer of a call butterfly spread will profit whichever way the price of the underlying asset moves
the writer of a call butterfly spread anticipates that the price of the underlying asset will not move significantly
the buyer of a call butterfly spread anticipates that the price of the underlying asset will increase slightly
4. American call options on shares are rarely exercised before expiry date because:
Group of answer choices
it sacrifices the options time value
it never pays to exercise before a share goes ex-dividend
it is too risky to exercise an option before its expiry date
it sacrifices the options intrinsic value
5. Which of the following is true?
Group of answer choices
A long call is the same as a short put
None of the above (picked)
A call on a stock plus a stock is the same as a put
A short call is the same as a long put
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