Finance 306 Final Exam |Questions &
Actual Answers 2025
Because of convexity, the duration model of interest rate risk is less accurate when - correct answer
>>>>The interest rate shock is large
What is the duration of a 2-year bond that pays an annual coupon of 10% and whose current yield to
maturity is 12%? Use $1000 as the face value - correct answer >>>>1.91 years
A bank has three assets. It has $75 million invested in consumer loans with a 3-year duration, $39
million invested in T-Bonds with a 16-year duration, and $39 million in 6-month maturity T-Bills with a
0.5- year duration. What is the duration of the bank's asset portfolio? - correct answer >>>>5.7 years
Writing a call is riskier than buying a put - correct answer >>>>True
Firms typically use ____ positions in futures contracts to hedge an asset that declines in value as interest
rates rise - correct answer >>>>Short
A macrohedge is a - correct answer >>>>Hedge of an entire balance sheet
A forward hedge is different from a futures hedge in that: - correct answer >>>>Forwards contracts can
involve nonstandardized amounts whereas futures are standardized
You have taken a long position in a call option on ABC common stock. The option has an exercise price of
$100 and the stock is currently trading at $110. The option premium is $8. What is your net profit on the
option if ABC's stock price increases to $111 at expiration? - correct answer >>>>$3
In a plain vanilla swap - correct answer >>>>One participant pays a fixed rate of interest and the other
party pays a variable rate of interest.`
Actual Answers 2025
Because of convexity, the duration model of interest rate risk is less accurate when - correct answer
>>>>The interest rate shock is large
What is the duration of a 2-year bond that pays an annual coupon of 10% and whose current yield to
maturity is 12%? Use $1000 as the face value - correct answer >>>>1.91 years
A bank has three assets. It has $75 million invested in consumer loans with a 3-year duration, $39
million invested in T-Bonds with a 16-year duration, and $39 million in 6-month maturity T-Bills with a
0.5- year duration. What is the duration of the bank's asset portfolio? - correct answer >>>>5.7 years
Writing a call is riskier than buying a put - correct answer >>>>True
Firms typically use ____ positions in futures contracts to hedge an asset that declines in value as interest
rates rise - correct answer >>>>Short
A macrohedge is a - correct answer >>>>Hedge of an entire balance sheet
A forward hedge is different from a futures hedge in that: - correct answer >>>>Forwards contracts can
involve nonstandardized amounts whereas futures are standardized
You have taken a long position in a call option on ABC common stock. The option has an exercise price of
$100 and the stock is currently trading at $110. The option premium is $8. What is your net profit on the
option if ABC's stock price increases to $111 at expiration? - correct answer >>>>$3
In a plain vanilla swap - correct answer >>>>One participant pays a fixed rate of interest and the other
party pays a variable rate of interest.`
