6, 7 and 8

6. Which of the following is approximately true when size is measured in terms of the underlying principal amounts or value of the underlying assets a. The exchange-traded market is twice as big as the over-the-counter market. b. The over-the-counter market is twice as big as the exchange-traded market. C. The exchange-traded market is ten times as big as the over-the-counter market. d. The over-the-counter market is ten times as big as the exchange-traded market. 7. A trader has a portfolio worth $20 million that mirrors the performance of a stock index. The stock index is currently 2500. Futures contracts trade on the index with one contract being on 250 times the index. To remove market risk from the portfolio the trader should a. Buy 32 contracts b. Sell 32 contracts C. Buy 16 contracts d. Sell 16 contracts 8. The spot price of Brent Crude is currently $55 per barrel. Two-year Treasury bonds currently yield 2%. What should the theoretical 2-year forward price of Brent Crude be equal to? a. $57.22 b. $56.51 C. $58.88 d. $59.08 9. A bond portfolio that has been fully hedged such that its duration is equal to zero is still exposed to risks stemming from what