5.When you calculate the duration, the weight in year t is equal to ____________.

the percentage of the total present value of the investment received in year t

the dollar amount of the investment received in year t

the percentage of the future value of the investment received in year t

the present value of the dollar amount of the investment received in year t

6.Suppose that you want to estimate VaR using a historical simulation. What is the correct order of the implementation of the historical simulation method?

I. Calculate daily losses for a portfolio under scenarios

II. Rank the losses

III. Collect historical data

I II III

II I III

III I II

II III I

7.Which of the following is correct? Choose all that are correct.

Investors sell short stocks when they predict a decline in the price of stock.

When you purchase a stock on margin, the margin in your account is the portion of the purchase value borrowed from a broker.

Proceeds earned from short sales can be reinvested in other securities once the short seller receives it.

Naked short selling indicates selling short shares that have not been borrowed.

8.Suppose that you construct Portfolio C consisting of two securities, A and B. Which of the following always holds for VaRs of A, B and C?

VaR_A + VaR_B = VaR_C

VaR_A + VaR_B VaR_C

VaR_A + VaR_B VaR_C

None of the above