1. A zero-coupon bond with 4 years to maturity and the yield to maturity of 8%. When the yield increases, the duration of this bond decreases.

a. True b. False

2) A bond issuer often repurchases Callable bonds for a discount bond.

a. True b. False

3. Credit Default Swap (CDS) is an insurance policy on default risk of corporate bond or loan.

a. True b. False

4) The delivery of the underlying asset is seldom made in forward contracts while the delivery is usually made in futures contracts.

a. True b. False

5) A U.S. firm has a 100,000 receivable with a 3-month maturity. To hedge the receivable, it will take a short position in a futures contract.

a. True b. False

6) A put option on Dr. Pepper Snapple Group, Inc., has an exercise price of $40. The current stock price is $41. The put option is in the money.

a. True b. False

7) A Japanese importer has a 1,000,000 payable due in one year. To hedge the position, it will buy put options on euro.

a. True b. False

8) A protective put is an insurance for an investment in a portfolio of stocks.

a. True b. False