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FIN 375 Exam 4 Review Flashcards | StudBud
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FIN 375 Exam 4 Review
FIN 375 Exam 4 Review
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1
A European put option gives its holder the right to _________.
sell the underlying asset at the exercise price only at the expiration date
buy the underlying asset at the exercise price on or before the expir. date
buy the underlying asset at the exercise price only at the expiration date
sell the underlying asset at the exercise price on or before the expir date
2
Advantages of exchange-traded options over OTC options include all but which one of the following?
contracts that are tailored to meet the needs of market participants
no concerns about counterparty credit risk
anonymity of participants
ease and low cost of trading
3
The swap market is huge, with around ______ in interest rate and exchange rate swap agreements outstanding.
$400 million
$400 billion
$400 trillion
$40 million
4
The geometric average rate of return is based on
the concept of expected return.
the CAPM.
the standard deviation of returns.
the principle of compounding.
5
The __________ index is a widely used index of non-U.S. stocks.
Dow Jones
None of the options are correct.
EAFE
CBOE
6
The dollar-weighted return on a portfolio is equivalent to
the geometric average return.
the portfolio's internal rate of return.
the time-weighted return.
the arithmetic average return.
7
WEBS portfolios
are shares that can be sold by investors.
are passively managed and are shares that can be sold by investors.
are free from brokerage commissions.
are passively managed.
8
Why is the holder of an option not required to post margin under the Option Clearing Corporation rules?
The credit worthiness of the holder covers all potential losses.
The holder must post securities instead of margin.
Once an option is purchased, no further money is at risk.
The seller pays all costs.
9
Buyers of listed options ____ required to post margins, and writers of naked listed options ___required to post margins.
are not; are
are not; are not
are; are
are; are not
10
As exchange rates change, they
All of the options are true.
will affect the flow of funds between the countries.
can affect imports and exports between those two countries.
change the relative purchasing power between countries.
11
In measuring the comparative performance of different fund managers, the preferred method of calculating rate of return
arithmetic average.
dollar weighted.
internal rate of return.
time weighted.
12
Using local currency returns, the S&P 500 has the highest correlation with
Euronext.
FTSE.
Nikkei.
Toronto.
13
The comparison universe is
the set of all mutual funds in the world.
a concept found only in astronomy.
the set of all mutual funds in the U.S.
a set of mutual funds with similar risk characteristics to your mutual fund
14
When an investor adds international stocks to his or her U.S. stock portfolio,
he or she can reduce the risk of his or her portfolio.
will increase his or her expected return but must also take on more risk.
it will have no impact on the risk or the return of his or her portfolio.
it will raise risk relative to the risk of just holding U.S. stock
15
refers to the possibility of expropriation of assets, changes in tax policy, & restrictions on FOREX transactions
Market risk
Market risk
Foreign exchange risk
Political risk
16
An American put option gives its holder the right to _________.
sell the underlying asset at the exercise price only at the expiration date
buy the underlying asset at the exercise price only at the expiration date
sell the underlying asset at the exercise price on or before the expir date
buy the underlying asset at the exercise price on or before the expir. date
17
The major concern that has been raised with respect to the weighting of countries within the EAFE index is
currency volatilities are not considered in the weighting.
the weights are not proportional to the assets of the respective countries.
inflation is not represented in the weighting.
cross-correlations are not considered in the weighting.
18
The initial maturities of most exchange-traded options are generally __________.
less than 2 years
less than 1 year
between 1 and 2 years
between 1 and 3 years
19
Longer-term American-style options with maturities of up to 3 years are called __________.
warrants
LEAPS
CATs
GICs
20
Which country is the leader in GDP per capita?
Switzerland
Canada
China
U.S.
21
The potential loss for a writer of a naked call option on a stock is _________.
limited
larger the lower the stock price
equal to the call premium
unlimited
22
Interest rate swaps involve the exchange of ________________.
net interest payments based on notional principal, no exchange of principal
actual floating-rate bonds for actual fixed-rate bonds
net interest payments and an actual principal swap
actual fixed-rate bonds for actual floating-rate bonds
23
The period 2011-2016, most correlations between the U.S. stock index and stock-index portfolios of other countries were
approximately zero.
positive but less than .9.
negative.
.9 or above.
