QUESTION 11 An oil distributor is planning to sell 100,000 barrels of oil in March (the current future price for March is $90) and wishes to hedge against a possible decline in oil prices. He sold 100 contract , each contract for 1,000 barrels. If at March oil price turns out to be $100. Whats the revenue from oil sales and profit on the futures? A. Revenue $9,000,000, Profit from futures $0. B. Revenue $10,000,000, Profit from futures -$1,000,000. C. Revenue $10,000,000, Profit from futures $0. D. Revenue $9,000,000, Profit from futures $-200,000.

QUESTION 12 Which one of the following is a true statement? A. A margin deposit can be met only by cash. B. All futures contracts require the same margin deposit. C. The maintenance margin is the amount of money you post with your broker when you buy or sell a futures contract. D. The maintenance margin is the value of the margin account below which the holder of a futures contract receives a margin call.

QUESTION 13 You research on two companies using Sharpe ratios. Company A has total return of 11% with standard deviation 10% and company B has total return of 12% with standard deviation 12%. According Sharpe ratios which company is good to invest assuming other factors are same and risk-free rate is 1%? A. Company A. B. Company B. C. Both Company A and company B. D. No of above

QUESTION 14 The risk-free rate, average returns, standard deviations, and betas for three funds and the S&P 500 are given below. Fund Avg Std Dev Beta A 18% 30% 1.05 B 25% 35% 1.3 C 20% 25% 1.2 S&P 500 15% 20% 1.0 Rf 5% What is the Treynor measure for portfolio A? A. 12.38% B. 2.38% C. 0.91% D. 3.64%

QUESTION 15 A speculator will often prefer to buy a futures contract rather than the underlying asset because: I. Gains in futures contracts can be larger due to leverage. II. Transaction costs in futures are typically lower than those in spot markets. III. Futures markets are often more liquid than the markets of the underlying commodities. A. I and II only B. II and III only C. I and III only D. I, II, and III

QUESTION 16 An oil distributor is planning to sell 100,000 barrels of oil in June (the current future price for June is $38 per barrel) and he wishes to hedge against a possible decline in oil prices. He sold 100 contracts, each contract for 1,000 barrels. Suppose that only three possible prices for oil in June are $36, $38, and $41 per barrel. If at June oil price turns out to be $41 per barrel, whats the revenue from oil sales and profit on the futures? A. Revenue $5,048,000, Profit from futures $0. B. Revenue $9,000,000, Profit from futures -$200,000. C. Revenue $5,000,000, Profit from futures $0. D. Revenue $4,100,000, Profit from futures - $300,000.

QUESTION 17 The following data are available relating to the performance of Monarch Stock Fund and the market portfolio: Monarch Market Portfolio Average return 16 % 12 % Standard deviations of returns 26 % 22 % Beta 1.15 1.00 Residual standard deviation 1 % 0 % The risk-free return during the sample period was 4%. Calculate Treynor's measure of performance for Monarch Stock Fund. A. 0.0143 B. 0.088 C. 0.44 D. 0.50

QUESTION 18 A portfolio generates an annual return of 17%, a beta of 1.2, and a standard deviation of 19%. The market index return is 12% and has a standard deviation of 16%. What is the M2 measure of the portfolio if risk-free rate is 4%? A. 2.15% B. 2.76% C. 2.94% D. 3.14%

QUESTION 19 A portfolio generates an annual return of 10%, a beta of 1.1, and a standard deviation of 15%. The market index return is 5% and has a standard deviation of 8%. What is Jensen's alpha of the portfolio if the risk-free rate is 1%? A. 0.027 B. 0.038 C. 0.056 D. 0.046

QUESTION 20 Assume there is a fixed exchange rate between the Canadian and U.S. dollar. The expected return and standard deviation of return on the U.S. stock market are 18% and 15%, respectively. The expected return and standard deviation on the Canadian stock market are 13% and 20%, respectively. The covariance of returns between the U.S. and Canadian stock markets is 1.5%. If you invested 50% of your money in the Canadian stock market and 50% in the U.S. stock market, the expected return on your portfolio would be A. 12.0%. B. 12.5%. C. 13.0%. D. 15.5%