__________instruments increase the liquidity of markets and the availability of funds by attracting investors and offering new opportunities for borrowers.

A. Market-broadening

B. Market-management

C. Risk-Management

D. Arbitrage-broadening

Suppose you purchase a call option on Asset XYZ that has an exercise price of $100. The option price is $3 per share. Suppose that on the expiration date, you exercise your option at the current price of $106. What is your net profit or loss per share?

A. -$3.00

B. $0.00

C. $3.00

D. $6.00

An ________________ rate swapagreement whereby two parties (called counterparties) agree to exchange:

A. interest, periodic interest payments

B. interest, regular dividend payments

C. futures, periodic interest fees

D. forward, periodic dollar compensation

The agreement is referred to as an interest rate ____________ when one party agrees to pay the other if the reference rate falls below a predetermined level.

A. ceiling

B. cap

C. floor

D. bottom

An asset denominated or valued in terms of foreign currency cash flows will lose value if the foreign currency declines in value. Such an asset is said to be exposed to which type of risk?

A. Maturity

B. Liquidity

C. Foreign Exchange

D. International Fischer Effect

If a AAA bond is selling at a discount, it is:

i. selling below its face value

ii. has a very low default risk

iii. providing a yield to maturity that is greater than its coupon rate

iv. selling above par

A. i and ii only

B. i, ii and iii only

C. ii and iii only

D. i, ii and iv only

One (1) advantage of liquid securities to the investors is the ability to:

A. easily encash their securities

B. invest in expensive securities

C. invest in profitable firms

D. invest in cheap securities