If you hold a $60 million bond portfolio with modified duration of 10 years. You expected the market interest rate increase by 5 basis points (0.05%) and you want to use the 5% coupon rate 15 years maturity U.S. Treasury bond futures with modified duration of 12 years and face value of $100,000 to hedge your portfolio. How many contracts do you need to hedge your portfolio if the treasury bond is trading at $100 per par value of 100? A. 10 B. 50 C. 20 D. 100

QUESTION 22 Suppose the initial margin requirement for the oil contract is 40%. Contract size is 1000 barrels. Current future price for March is $30. The spot oil price at maturity date is 36. If you only invest on oil commodity and dont use future contract, whats your return if you buy the oil? The leverage ratio from using oil futures is_________. A. 50%, 2.0 B. 20%, 3.0 C. 10%, 4.0 D. 20%,

QUESTION 23 Suppose the 6-month risk-free rate of return in the United States is 5%. The current exchange rate is 1 pound = US$2.05. The 6-month forward rate is 1 pound = US$2. The minimum yield on a 6-month risk-free security in Britain that would induce a U.S. investor to invest in the British security is ________. A. 5.06% B. 3.74% C. 9.48% D. 7.63%

QUESTION 24 As exchange rates change, they A. change the relative purchasing power between countries. B. can affect imports and exports between those two countries. C. will affect the flow of funds between the countries. D. All of the options are true.

QUESTION 25 The yield on a 1-year bill in the United Kingdom is 5%, and the present exchange rate is 1 pound = US$2. If you expect the exchange rate to be 1 pound = US$1.98 a year from now, the return a U.S. investor can expect to earn by investing in U.K. bills is approximately __________. A. -5.4% B. 2.5% C. 3.15% D. 3.95%

QUESTION 26 Suppose you purchase one share of the stock of XYZ Corporation at the beginning of year 1 for $36. At the end of year 1, you receive a $2 dividend and buy one more share for $30. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share) and sell the shares for $36.45 each. The dollar-weighted return on your investment is A. 1.75%. B. 4.08%. C. 8.53%. D. 12.35%.

QUESTION 27 ________ refers to the possibility of expropriation of assets, changes in tax policy, and the possibility of restrictions on foreign exchange transactions. A. Default risk B. Foreign exchange risk C. Market risk D. Political risk

QUESTION 28 A portfolio generates an annual return of 15%, a beta of 1.1, and a standard deviation of 10%. The market index return is 5% and has a standard deviation of 12%. What is the Sharpe ratio of the portfolio if the risk-free rate is 4%? A. 2.00 B. 0.500 C. 1.00 D. 1.10

QUESTION 29 Margin must be posted by ________. A. buyers of futures contracts only B. sellers of futures contracts only C. both buyers and sellers of futures contracts D. speculators only

QUESTION 30 Suppose the initial margin requirement for the oil contract is 40%. Contract size is 1000 barrels. Current future price for March is $30. If the spot oil price at maturity date is 33, whats your return if you long the contract? A. 22.01% B. 29.00% C. 30.00% D. 25.00%.