DEfine economic growth
1. The market value of all final goods and services produced within domestic territory of the country during a year is known as- a. GDPMP b. GDPFC C. GNPMP d. GNPFC 2. The money value of all final goods and services produced in the domestic territory of a country during a year plus Net factor income from abroad is called- a. GDPMP b. GDPFC C. GNPMP d. GNPFC 3. The difference between the income received from abroad for rendering factor services by the normal residents of the country to the rest of the world and income paid for the factor services rendered by nonresidents in the domestic territory of a country is known as- a. Net Factor Income from Abroad b. Capital Consumption Allowances c. Depreciation d. None of these. 4. The difference between indirect tax and subsidy is known as- a. Net Factor Income from Abroad b. Capital Consumption Allowances c. Depreciation d. Net Indirect Tax.5. Net National Product at Factor Cost (NNPFc) is also known as- a. Net Factor Income from Abroad b. National Income c. National cost d. Net Indirect Tax. 6. That part of personal income which is actually available to households for consumption and saving is called a. National Disposable Income b. Personal Disposable Income c. Personal Income d. None. 7. Real and nominal income is calculated respectively at-- a. Current price and Constant Price b. Constant price and Current price c. Current price and Current price d. Constant price and Constant price. 8. GDP Deflator is equal to--- Nominal GDP a. x 100 Real GDP b. - x 100 Real GDP Nominal GDP Nominal GNP C. x 100 Nominal NDP d. x 100 Real GNP Real NDPA financial institution has written f1 billion of five-year equity linked bonds with maturity guarantees. Rather than buying a five-year Put option as a hedge, it has been delta hedging the implicit option dynamically using equity index futures. Eighteen months from the outset, you have been asked to compare retrospectively the effect of the futures based strategy against what the institution would have experienced had it purchased a five-year option. You have broken down the difference between the two strategies into the main option sensitivities (Greeks) and separated the figures into three time periods: . Months 1-6 ("Market fall"), during which equity prices fell steadily. . Months 7-12 ("Volatile period"), during which equity prices were extremely volatile but finished at levels similar to those at the start of the period. . Months 13-18 ("Market recovery"), during which equity prices rose steadily. Your analysis assumes that market implied volatilities remained at 30% throughout the eighteen month period, this being the same volatility as was assumed throughout in the delta hedging calculations.fm Delta Gamma Theta Rho Vega Total Market fall -1 -11 +5 -5 -12 Volatile period -2 -22 +3 -22 -43 Market recovery +1 -5 +5 +1 Total -2 -38 +13 -27 -54 You now need to consider how to report these figures to the Board (i) Describe the likely causes of these figures and the lessons that could be learnt from them. [10] The Board receives your initial report, but responds that it is concerned about the assumption that implied volatility stayed at one level throughout the eighteen months. It therefore asks you to adjust your analysis to allow for implied volatilities that actually occurred in the market during that time. You repeat your calculations with these actual market implied volatilities, and derive the following table of results: fm Delta Gamma Theta Rho Vega Total Market fall -1 -11 +5 -5 12 Volatile period -13 +13 -25 -42 -67 Market recovery +1 -5 +5 +26 +27 Total -29 +23 -30 -16 -52 (1i) Explain how this new information might change your answer to (1). [4]
