Question 1

Which of the following is not true about interest rate swaps?

Accepted Answer

A)  Payments are based on a notional principal. 
B)  Floating rate payers profit if interest rates fall. 
C)  Payments can be quarterly as well as semi-annually. 
D)  Parities exchange debt obligations. 
E)  Default risk is a possibility in the swaps market. 
A)  Payments are based on a notional principal. 
B)  Floating rate payers profit if interest rates fall. 
C)  Payments can be quarterly as well as semi-annually. 
D)  Parities exchange debt obligations. 
E)  Default risk is a possibility in the swaps market.

Question 2

Exhibit 23.5
Use the Information Below for the Following Problem(S)
Exclusive Industries has debentures outstanding (par value $1,000.00) convertible into exclusive's common stock at $30. The coupon rate is 11% payable semiannually and they mature in 10 years.
-Refer to Exhibit 23.5.Calculate the conversion value if the stock price is $24.00 per share.

Accepted Answer

A)  $600.00 
B)  $700.00 
C)  $800.00 
D)  $900.00 
E)  $1,000.00 
A)  $600.00 
B)  $700.00 
C)  $800.00 
D)  $900.00 
E)  $1,000.00

Question 3

Exhibit 23.1
Use the Information Below for the Following Problem(S)
A company buys an interest rate cap that pays the difference between LIBOR and 8% if LIBOR exceeds 8%. Current LIBOR is 7%. The amount of the option is $2,500,000, and the settlement is every 6 months. Assume a 360 day year.
-Refer to Exhibit 23.1.Find the payoff if LIBOR closes at 8.2%.

Accepted Answer

A)  $0.00 
B)  $25,000.00 
C)  $50,000.00 
D)  -$25,000.00 
E)  -$50,000.00 
A)  $0.00 
B)  $25,000.00 
C)  $50,000.00 
D)  -$25,000.00 
E)  -$50,000.00

Question 4

A real option is a reference to

Accepted Answer

A)  Options on physical assets. 
B)  Options on commodity futures. 
C)  The value of flexibility embedded in a real asset. 
D)  a and b. 
E)  b and c. 
A)  Options on physical assets. 
B)  Options on commodity futures. 
C)  The value of flexibility embedded in a real asset. 
D)  a and b. 
E)  b and c.

Question 5

The investment value of a convertible bond is the price which it would be expected to sell as a straight debt instrument.

Accepted Answer

A) True 
 B)False

Question 6

In convertible bonds,the value of the common stock price upon immediate conversion is the

Accepted Answer

A)  Put-call parity price. 
B)  Conversion parity price. 
C)  Cash equivalent price. 
D)  Convertible price. 
E)  Redemption price. 
A)  Put-call parity price. 
B)  Conversion parity price. 
C)  Cash equivalent price. 
D)  Convertible price. 
E)  Redemption price.

Question 7

An example of a commodity-linked fixed income security is a

Accepted Answer

A)  Cap and floor note. 
B)  Cash and debit. 
C)  Commodity debenture. 
D)  Bull and bear note. 
E)  Derivative commodity note. 
A)  Cap and floor note. 
B)  Cash and debit. 
C)  Commodity debenture. 
D)  Bull and bear note. 
E)  Derivative commodity note.

Question 8

All of the following are normal characteristics of a convertible bond,except

Accepted Answer

A)  Conversion at the option of the issuer. 
B)  Conversion into a fixed number of shares of common stock. 
C)  A conversion price initially above the market price of the common stock. 
D)  An interest rate lower than that on straight debentures. 
E)  Subordination. 
A)  Conversion at the option of the issuer. 
B)  Conversion into a fixed number of shares of common stock. 
C)  A conversion price initially above the market price of the common stock. 
D)  An interest rate lower than that on straight debentures. 
E)  Subordination.

Question 9

The conversion price parity for a convertible bond is defined as:

Accepted Answer

A)  Market Price of Convertible Bond/Conversion Ration. 
B)  Market Price of Convertible Bond × Conversion Ration. 
C)  Market Price of Convertible Bond - Conversion Ration. 
D)  Market Price of Convertible Bond + Conversion Ration. 
E)  None of the above. 
A)  Market Price of Convertible Bond/Conversion Ration. 
B)  Market Price of Convertible Bond × Conversion Ration. 
C)  Market Price of Convertible Bond - Conversion Ration. 
D)  Market Price of Convertible Bond + Conversion Ration. 
E)  None of the above.

Which of the following is not true about interest rate swaps?

A real option is a reference to

The investment value of a convertible bond is the price which it would be expected to sell as a straight debt instrument.

In convertible bonds,the value of the common stock price upon immediate conversion is the

An example of a commodity-linked fixed income security is a

All of the following are normal characteristics of a convertible bond,except

The conversion price parity for a convertible bond is defined as:

An Overview of the Investment Process

The Asset Allocation Decision

The Global Market Investment Decision

Securities Markets: Organization and Operation

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Security Valuation Principles

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Equity Portfolio Management Stragtegies

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Professional Money Management, alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Investment Return and Risk Analysis Questions

Investment and Retirement Plans

Calculating Covariance and Correlation Coefficient of Assets

Portfolio Variance and Stock Weight Calculations

Portfolio Optimization with Negative Correlation: Finding Minimum Variance and Weight Allocation

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Exam 23: Swap Contracts,convertible Securities,and Other Embedded Derivatives

Which of the following is not true about interest rate swaps?

A real option is a reference to

The investment value of a convertible bond is the price which it would be expected to sell as a straight debt instrument.

In convertible bonds,the value of the common stock price upon immediate conversion is the

An example of a commodity-linked fixed income security is a

All of the following are normal characteristics of a convertible bond,except

The conversion price parity for a convertible bond is defined as:

An Overview of the Investment Process

The Asset Allocation Decision

The Global Market Investment Decision

Securities Markets: Organization and Operation

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Security Valuation Principles

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Equity Portfolio Management Stragtegies

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Professional Money Management, alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Investment Return and Risk Analysis Questions

Investment and Retirement Plans

Calculating Covariance and Correlation Coefficient of Assets

Portfolio Variance and Stock Weight Calculations

Portfolio Optimization with Negative Correlation: Finding Minimum Variance and Weight Allocation

Filters