Q6. Which of the following is/are True? (A) Swaps are used for financial engineering (B) Swaps are traded in exchange-traded markets without financial intermediaries (C) Swaps are based on the principle of competitive advantage (D) All of the above Answer: _______________

Q7. Based on the information below, what position and number of Index Futures contracts are needed to increase the Beta () of the portfolio from 0.8 to 2.2?

(A) Short 20 contracts of Index Futures (B) Short 55 contracts of Index Futures (C) Long 35 contracts of Index Futures (D) None of the above Answer: _______________

Q8. Disney wants to borrow Euro at a fixed rate of interest. Volkswagen wants to borrow US dollar at a fixed rate of interest. In terms of borrowing costs, they face the following rates per annum:

Euro US dollar Disney 7.25% 3.50% Volkswagen 3.25% 1.00% To create a Swap contract between Disney and Volkswagen, which of the following is Correct? (A) Disney has comparative advantage in Euro; Volkswagen has comparative advantage in US dollar (B) Volkswagen has comparative advantage in Euro; Disney has comparative advantage in US dollar (C) Disney has comparative advantage in both Euro and US dollar (D) Volkswagen has comparative advantage in both Euro and US dollar Answer: _______________

Q9. Which of the following is a Zero Sum Game? (A) Short Forward and Short Futures on the same underlying (B) Long Call Option and Long Put Option on the same underlying (C) Short Call Option and Long Put Option on the same underlying (D) None of the above Answer: _______________

Q10. In order to provide a Portfolio Insurance to hedge against a significant decrease in S&P index, which of the following positions and derivatives should be consider? (A) Long position in Futures on S&P index (B) Short position in Put Options on S&P index (C) Long position in Put Options on S&P index (D) Long position in Call Options on S&P index Answer: _______________

Q11. Which of the following can be valued using Real Options: (I) Firms growth options; (II) Movie sequels; (III) Business expansions and future investments with flexibility (A) II only (B) I only (C) II and III only (D) I, II, and III Answer: _______________

\begin{tabular}{|l|l|l|} \hline Value of Portfolio & P & $50,000 \\ \hline Value of the assets (index) underlying one Index Futures contract (= futures price contract size) & A & $2000 \\ \hline Beta () of Portfolio & & 0.8 \\ \hline \end{tabular} following rates per annum