1. A protective put plays a role of an insurance for an investment in a portfolio of stocks. (10points)

a. True b. False

2. When yield to maturity falls, as a result of bond convexity, an increase in a bond's price is smaller than the price decrease resulting from an increase in yield of equal magnitude. (10points)

a. True b. False

3. The duration of a 10-year zero-coupon bond is less than 10 years. (10points)

a. True b. False

4. The market neutral hedge establishes long and short positions on both sides of the market to eliminate risk and to benefit from security asset mispricing. (10points)

a. True b. False

5. You believe that the spread between the September S&P 500 future and the S&P 500 Index is too large and will soon correct. This is an example of convergence arbitrage. (10points)

a. True b. False