QUESTION 15

1. Why does immunization against interest rate shocks using duration for fixed-income securities work?

   	A.	Because interest rate changes are relatively predictable.
   	B.	Because the fixed-income security gravitates toward its maturity value as it approaches its maximum duration.
   	C.	It doesnt work because perfect immunization is impossible to accomplish.
   	D.	Because the gains or losses on reinvested cash flows that result from an interest rate change are exactly offset by losses or gains from the security when it is sold.
   	E.	Because cash flows that result from the security are not reinvested so they are not affected by interest rate changes in the same way as the securitys gain or loss when it is sold.

1 points

QUESTION 16

1. From the perspective of an FI, which of the following is an advantage of a floating-rate loan?

   	A.	The pre-specified interest rate remains in force over the loan contract period no matter what happens to market interest rates.
   	B.	The bank can request repayment of a loan at any time in the contract period.
   	C.	The default risk is completely eliminated.
   	D.	The interest rate risk is transferred to the borrower.
   	E.	Stable interest payments will be received throughout the loan period.

1 points

QUESTION 17

1. Participation in the activities relating to the underwriting and distribution of new issues of debt and equity by a securities firm involves the function of

   	A.	trading.
   	B.	investing.
   	C.	merger and acquisitions.
   	D.	market making.
   	E.	investment banking.