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Time left 0 : 1 3 : 1 7 Question 1 Not yet savedMarked out of 1 . 0 0 Flag questionQuestion textA bank estimates

Time left 0:13:17Question 1Not yet savedMarked out of 1.00 Flag questionQuestion textA bank estimates that its profit next year is normally distributed with a mean of 0.9% of assets and the standard deviation of 3% of assets. How much equity (as a percentage of assets) does the company need to be 99.9% sure that it will have positive equity at the end of the year? Ignore taxes.Question 1 Answera.3.09b.9.27c.8.37d.2.19Question 2Not yet savedMarked out of 1.00 Flag questionQuestion textUsing risk-neutral valuation, the price of an option is $20. If investors are risk-averse, the market price of the option will beQuestion 2 Answera.Greater than 20b.20c.Less than 20Question 3Not yet savedMarked out of 1.00 Flag questionQuestion textSuppose that GARCH (1,1) parameters have been estimated as =0.000002,=0.04, and =0.94. The current daily volatility is estimated to be 3.5%. Estimate the volatility per annum that should be used to price a 60-day option.Question 3 Answera.18.9%b.33.1%c.50.8%d.43.5%Question 4Not yet savedMarked out of 1.00 Flag questionQuestion textA six-year bond with a continuously compounded yield of 6% provides a 5% coupon at the end of each year. Use duration and convexity to estimate the effect of a 1% increase in the yield on the price of the bond.Question 4 Answera.Price will increase by 5.16%b.Price will decrease by 5.16%c.Price will decrease by 5.3%d.Price will increase by 5.3%Question 5Not yet savedMarked out of 1.00 Flag questionQuestion textThe parameters of a GARCH (1,1) model are estimated as =0.000004,=0.05, and =0.92. If the current volatility is 20% per year, what is the expected volatility per year in 20 days?Question 5 Answera.14.7%b.1.2%c.19.3%d.3.7%Question 6Not yet savedMarked out of 1.00 Flag questionQuestion textA stock price has an expected return of 9% and a volatility of 25%. It is currently $40. What is the price of a binary option that pays $100 if the stock price in 6 month is higher than $50? Assume the risk-free rate is zero.Question 6 Answera.86.35b.8.84c.15.44d.13.65

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